Banks significance stressed:

Mandatory Code of Corporate Governance for Banks

The Central Ba- nk has last week released the draft Mandatory Code of Corporate Governance. This new draft has been prepared after taking into consideration the comments and suggestions received from a large number of stakeholders including banks, regulators, auditors, the business community and investors on the Exposure Draft that was previously released.

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.

Over the past decade or so, several fundamental corporate governance principles have evolved and received worldwide acceptance.

Comprehensive corporate governance codes under such principles have also been developed and implemented by supervisory and regulatory authorities in many countries.

The new draft Mandatory Code has been designed as a series of rules based upon certain fundamental principles which would promote a healthy and robust risk management framework for banks, with accountability and transparency through policies and oversight by the boards of directors.

The implementation of the new Mandatory Code, in due course, is expected to greatly improve the soundness of the banking system, which is vital to safeguard the interest of depositors and to maintain financial system stability.

Strengthening corporate governance in banks is also important in preparing for the implementation of the new Basel II Capital Adequacy Framework.