Building on the 2006 corporate guidance authored by the Basel Committee on Banking Supervision and drawing on the lessons learned during the current global financial crisis, the Committee's consultative document, Principles for enhancing corporate governance, sets out best practices for banking organisations.
The key areas where the principles have been strengthened include: (1) the role of the board; (2) the qualifications and composition of the board; (3) the importance of an independent risk management function, including a chief risk officer or equivalent; (4) the importance of monitoring risks on an ongoing firm-wide and individual entity basis, (5) the board's oversight of the compensation systems; and (6) the board and senior management's understanding of the bank's operational structure and risks.
The principles also emphasise the importance of supervisors regularly evaluating the bank's corporate governance policies and practices as well as its implementation of the Committee's principles.
