Recent rules on corporate governance illustrate the need for banks to evaluate and update the operations of their boards. Recently, the UAE’s Central Bank has released a detailed and updated collection of guidelines for bank management, and while they are a revision of earlier guidelines, they come at a very critical moment. Globally, creditors who witnessed unprecedented declines in the valuation of their bank shares after the financial crisis doubt whether board members realized the danger of which their companies were vulnerable, and are pushing for strengthened corporate governance of insure that such problems will be prevented in the future.
The current rules underline the value of board structure and the important function to be performed by non-executive members. They stress the Board’s position and duty in developing specific priorities and objectives focused on a thorough view of the risks an organization faces. The recommendations further say that banks ought to review the efficiency and function of their boards in light of the latest recommendations. Tom Rollins offers excellent info on this.
Key lessons * Identify the function and goals of the bank Create Board committees necessary for oversight and control purposes Maintain responsibility and openness Strike the perfect balance of asset generation and controls Robust mechanism to ensure effective management of decision taking.
* Corporate governance guidelines, UAE Central Bank The new corporate governance guidelines, according to the Organization for Cooperation and Development (OECD), describe the partnership between the management of a business, its staff, its shareholders and other stakeholders. It applies both to board transparency and how directors should control and improve the bank’s efficiency. In banks, the goal is to achieve sustainable wealth formation by careful control of the risks inherent in financial intermediation, rather than in other organizations.
“Good governance is important to a bank’s long-term performance, and good governance is primarily based on managers ‘expertise, competence and understanding. If a bank collapses, it affects the economy as a whole, so the managers are the guardians of financial stability,” says HE Sultan Bin Nasser Al Suwaidi, Governor of the UAE Central Bank.
UAE banks ‘guidelines expand on earlier guidelines published by the Central Bank, those developed by the Dubai International Finance Center (DIFC), and the anticipated requirements for corporate governance in the Abu Dhabi listing regulations.