Published: 12 Feb 2013 23:23 GMT+01:00 | Print version
Updated: 12 Feb 2013 23:23 GMT+01:00
The Financial Stability Board, a Basel-based international watchdog, is calling for tightened corporate governance in the banking sector, saying such a step is needed to stem a culture of excessive risk taking.
"The recent global financial crisis exposed a number of risk governance weaknesses in major financial institutions, relating to the roles and responsibilities of corporate boards of directors," the FSB said on Tuesday as it launched a report on how to avoid a repeat of past failings in the sector.
In a statement, it underlined that the issue also concerned company-wide risk management and the need for an independent assessment of risk governance.
"Without the appropriate checks and balances provided by the board and these functions, a culture of excessive risk-taking and leverage was allowed to permeate in many of these firms," it said.
The FSB, set up in 2009, has been mandated by the G20 group of nations to strengthen banking sector legislation.
It surveyed 36 banks and broker-dealers deemed as significant for the purpose of its report.
It underlined that many company board members lacked in-depth experience in the financial sector and therefore fell short when it came to ensuring rules were respected.
It warned that many company boards paid too little attention to risk-management, even though firms and regulators have taken steps to beef-up policing.
The FSB is chaired by Mark Carney, the outgoing governor of the Bank of Canada who is due to take the reins of the Bank of England in July.
The board is hosted by the Basel-based Bank for International Settlements, sometimes dubbed the central bank of central banks.
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