14th November 2016, the Basel Committee released a revised set of guidelines on corporate governance at banks in India. The committee proposed a list of guidelines focusing on the principles for enhancing corporate governance. The main purpose of revising the principles to strengthen the guidance especially on risk governance that includes risk management roles played by business units, risk management teams, and internal audit & control functions, popularly known as three lines of defense. It is also important to have a sound and effective risk culture in driving risk management within the banking industry. The rudimentary aspect of laying down this risk management principles and guidelines is to expand the role of the board of directors in overseeing the implementation of an effective risk management systems keeping in tandem the business and corporate law. The implementation of latest and revised corporate business law has helped to emphasize the importance of the board's collective competence. Along with that, the revised principles also focus on the obligation on individual board members in order to dedicate sufficient time to their mandates and to remain current on developments in banking. It also provides guidance for bank supervisors in evaluating the processes used by banks to select board members and senior management. The implementation of the latest business corporation law is to recognize the compensation systems form a key component of corporate governance and incentive structure through which the board and senior management of a bank convey acceptable risk-taking behavior and reinforce the bank's operating and risk culture.
An effective corporate governance program is really a critical and important aspect to ensure proper functioning of a bank, banking sector as a whole and also the economy of a country. Although there is no single approach to a good and sound corporate governance policy, the Basel committee has revised its principle in providing a proper framework that bank and supervisors should operate to achieve a robust and transparent risk management system. It also helps in decision making, promotes public confidence and most importantly upholds the safety for the public and creates a sound banking system.
The Basel committee welcomes the comments on this document measured to be consultative. Comments on the proposals need to be uploaded on the site by 28th November 2016. All comments can also be sent by post at this address: Secretariat of the Basel Committee on Banking Supervision, Bank for International Settlements, CH-4002 Basel, Switzerland. All comments can/may be published on the website of the Bank for international settlements unless and until respondent requests for any confidential treatment.
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