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[size=36][rtl]Governance in banks and their economic impact[/rtl][/size]
Monday, 15 April 2019
Monday, 15 April 2019
Abdulrahman Al - Sheikhly
The International Organization for Economic Cooperation and Development (IMF) of the International Monetary Fund (IFC) has developed corporate governance principles to improve the economic efficiency and economic growth of OECD countries. Corporate governance includes a set of relationships between the management of the company, its boards of directors, shareholders and the stakeholder group. Company and report means to achieve these goals and monitor performance.
Good corporate governance provides appropriate and sound incentives to the Board of Directors to achieve objectives that are in the interest of the company and its shareholders. Effective supervision, an effective corporate governance system in each company and the economy as a whole help to provide a degree of confidence for the safety of a market economy. To fight corruption, reduce the cost of capital, attract more stable sources of finance and encourage enterprises to use resources more efficiently, boosting economic growth.
The corporate governance framework depends on the legal and regulatory environment, as well as other factors such as business ethics and the extent to which companies recognize the environmental and social interests of society.
Over the past 25 years, the focus has been on the application of the principles of corporate governance in banks as a result of rapid developments in the financial markets and the globalization of financial flows and technological progress, resulting in increasing competitive pressures between banks and non-banking institutions, growth in financial markets and diversification of banks' financial instruments. , Which has increased the importance of risk measurement, management and control, as it requires continuous innovation of business management methods, risks and change of laws and supervision systems to maintain the integrity of the banking system.
Banks differ from the rest of the companies because their collapse affects a wider circle of people and leads to a doubling of the financial system itself, which has adverse effects on the economy as a whole, which places special responsibility on the members of the boards of directors of those banks, and since the members of the board can not do all And they must delegate certain tasks, they must ensure that those who have entrusted them have the authority and the framework through which to review the proper use and security of the Authority.
The Bank for International Settlements defines banking governance as the methods by which banks are managed by the Board of Directors and senior management, which determines how to set the Bank's objectives and operate and protect the interests of shareholders and stakeholders with a commitment to act in accordance with prevailing laws and regulations to protect the interests of depositors .
Principles of Governance in Banks
The Basel Committee issued a report on strengthening governance in banks in 1999 and issued a revised version of it in 2005. In February 2006, it issued another updated version entitled "Enhancing Corporate Governance for Banking Organization" which includes the principles of governance in banks.
The members of the Board of Directors must be fully qualified to their positions and be fully aware of the governance and the ability to manage the Bank's business. Board members are fully responsible for the Bank's performance and financial stability, formulating the Bank's business strategy, risk policy, avoiding conflicts of interest, Resolutions when there is a conflict of interest renders them unable to fully perform their duties towards the Bank and to restructure the Board, including the number of members, thereby encouraging greater efficiency. The duties of the Board include selecting, supervising and appointing Within the availability of competencies capable of Directors of the Bank and to be members of the Board are very familiar with the principles and foundations of the financial activities of the bank, which must be followed and the environment legislative, and the board of directors to form committees to help him, including an executive committee and an internal audit committee and the Audit Committee in cooperation with the auditors and the decline and receive their reports and take Corrective decisions in a timely manner to identify weaknesses in control and inconsistencies with policies, laws and regulations. The Board of Directors shall also set up a Risk Management Committee to set principles for senior management on credit risk management, market liquidity, operating, reputations and other risks, and the Wages Committee that sets the remuneration systems and the principles of appointing executive management and officials in line with the Bank's objectives and strategy.
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