The Basel Committee's revised principles on corporate governance at banks build on the Committee's 2010 document Principles for enhancing corporate governance. Specifically, the revised principles:
- strengthen
the guidance on risk governance, including the risk management roles
played by business units, risk management teams, and internal audit and
control functions (the three lines of defence) and the importance of a
sound risk culture to drive risk management within a bank;
- expand
the guidance on the role of the board of directors in overseeing the implementation
of effective risk management systems;
- emphasise
the importance of the board's collective competence as well as the
obligation on individual board members to dedicate sufficient time to
their mandates and to remain current on developments in banking;
- provide
guidance for bank supervisors in evaluating the processes used by banks to
select board members and senior management; and
- recognise
that compensation systems form a key component of the governance and
incentive structure through which the board and senior management of a
bank convey acceptable risk-taking behaviour and reinforce the bank's
operating and risk culture.
Effective corporate governance is critical to the
proper functioning of the banking sector and the economy as a whole. While
there is no single approach to good corporate governance, the Committee's
revised principles provide a framework within which banks and supervisors
should operate to achieve robust and transparent risk management and
decision-making and, in doing so, promote public confidence and uphold the
safety and soundness of the banking system