Corporate governance code for banks- CB
The Central Bank on Friday released a draft of the Mandatory Code of Corporate Governance for Licensed Banks in Sri Lanka
This is one of the policy measures announced in the Central Bank’s Road Map: Monetary and Financial Sector Policies for 2007 and Beyond released in January.
It deals with the issue of mandatory corporate governance rules covering important areas of corporate governance principles. The Central Bank said in a statement on Friday it was releasing the ‘exposure’ draft on corporate governance for banks soliciting the views, comments and suggestions from the stakeholders of banks and the general public in the interest of stability of the banking and financial system.
It said the need for a mandatory code of corporate governance arises due to the significance of the business of banks in the economy and current global developments in corporate governance practices. “Banks carry on business by mobilizing funds from general public. Weak governance could lead to banking failures which could eventually undermine the public confidence in the banks. Therefore, it is necessary that banks are managed with prudence and accountability,” the statement said.
The proposed corporate governance code is intended to make the board of directors of banks responsible and accountable for management of affairs of banks inclusive of the business and risk management. However, the board is empowered to delegate functions relating to business operations to the executive management while policy making and supervisory role is retained with the board. To facilitate this governance framework, the proposed code prescribes several principle-based rules on responsibilities of directors, chairman and chief executive officer, criteria for fitness and propriety of directors, management of related party transactions and conflicts of interests and functions of board appointed committees to supervise the executive management, the statement added.The Central Bank said it welcomes views, comments and suggestions from all those who are interested in good governance of banks so that the Central Bank is able to further improve the proposed draft.