Corporate Governance

Transcription

1 Corporate Governance Seminar for Senior Bank Supervisors from Emerging Economies Washington DC, U.S.A. October Ruth de Krivoy

2 This presentation was prepared exclusively for a Toronto Centre program. Information in this presentation has been summarized and is made available for learning purposes only. The information presented as examples or case studies should not be regarded as complete, factual or accurate and may contain fictional information. Discussions and conclusions reached about any named parties in the examples or case study should be considered as learning material only. No part of this presentation may be reproduced, disseminated, stored in a retrieval system, used in a spreadsheet, or transmitted in any form without the prior written permission of Toronto Centre. The examples and case studies in this presentation are based on information that was in the public domain at the times mentioned or which became public after the resolution of the issues. It does not include information confidential to any of the parties involved. Toronto Centre and the Toronto Centre logo are trademarks of Toronto Leadership Centre. Copyright Toronto Leadership Centre All rights reserved. 2

3 How to make good corporate governance happen How to distinguish good corporate governance from bad What to look for How to look for it How to talk about it with bank owners and directors How to assess available tools How to be effective Time is of the essence 3

4 Corporate governance: People and politics Key elements Relations between the firm and its shareholders Governance within the firm Shareholders Board of directors Senior management Internal controls 4

5 Risk culture is the new frontier Holding boards and senior management directly responsible for Establishing, maintaining and communicating the firm s values Leading the firm toward cultural and ethical change Risk culture indicators Tone from the top Accountability Effective challenge / Checks and balances Incentives Code of conduct 5

6 The supervisor s role The supervisor s role is to ensure that regulated firms are well run and thus less likely to fail Prudent risk taking Treating clients and counterparties fairly 6

7 The challenge Looking for behaviors and attitudes that are not supportive of sound risk management Intervening early on to address observations and stop potential build-up of excessive risk Can you be intrusive? Do you have the powers? Resources? Tools? Do you have the political support? 7

8 Corporate governance matters The Venezuelan experience Runs on a bank in the 1980s The 1994 banking crisis The 2009 banking crisis 8

9 Shareholders Publicly owned company vs Concentrated ownership Listed or unlisted Risk culture Values Behavior Views on reputational risk and connected lending Political connections Why do people want to own a bank? 9

10 Licensing & Control ownership Licensing policy Fit and proper rules Suitability of control owners The Venezuelan experience on licensing Until the 1980s: light populism and bipartisan politics Reforms in the early 1990s Chavismo 10

11 Board of Directors Loyalties / Conflicts of interest Independent non-executive directors Skills and competencies / Experience / Expertise What do they bring to the board? Is independence real? Values: paying lip service to standards? Group dynamics Board committees 11

12 Roles and responsibilities of the board Establish, guide and oversee adherence to strategy, policy, conduct and values Understand the business Establish framework for risk governance Support and constructively challenge the executive management Does the board know what goes on? Does the board understand risks? Avoid expert-dominated boards, as they may compromise board effectiveness 12

13 Management CEO manages relationship with the supervisor Personality Delegation Succession Suitability Owner, chairman of the board and CEO, and no successor 13

14 Management Senior management Chief Risk Officer Internal controls Independence Professionalism Reliability Quality of reports 14

15 Supervisory environment Common law or Civil law Checklist mentality Powers Comply or explain may not be enough Dialogues With management With board With owner / control shareholders 15

16 Tools On site > Off site Risk card: questions / issues to focus on Script for dialogue with control shareholders, board and management Executive presentation/speaking skills Peer group reviews in agency Process to reach a judgement 16

17 Tricks of the trade Communicate forcefully Make sure you have the legal power, political support and legal protection to follow through Focus on behavior Substance > Form Beware of rituals Avoid rehearsed board meetings Pay attention to gossip 17

18 Gender There is a strong business case for promoting improved gender balance in financial institutions Improved corporate governance Clear communications to employees Prioritizing customer satisfaction Sensitivity to diversity and corporate social responsibility Risk aversion Women are more risk averse than men Is gender balance an issue discussed in your country? Do you have rules to improve the representation of women on boards and in senior management? 18

19 Family- and State-owned banks Where can things go wrong? Owner Board quality Board leadership on agendas and management information CEO: submissive to owner, over-dominant to management Risk culture / Understanding of risks What happens when supervisors ask difficult questions? 19

20 Opportunities to effect change Pick the right moment! Changes of control ownership may be a time to effect change New owners New board New management Refuse to authorize unsuitable candidates and change the decision making dynamics 20

21 Toronto Centre Resource Centre Key References can be found here. The TCRC is an online curated library compiling publications relevant to supervisors and regulators drawn from over 50 sources worldwide. 21

22 Program Funded by: