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CB
releases Exposure Draft
Mandatory
Code of Corporate Governance for Licensed Banks
One
of the policy measures announced in the Central Bank’s Road
Map: Monetary and Financial Sector Policies for 2007 and Beyond
released on 2nd January 2007 is the issue of mandatory corporate
governance rules covering important areas of corporate governance
principles.
Accordingly,
the Central Bank has released 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.
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 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 Central Bank 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.
The final date for receiving the views and comments on this first
draft is October 31, 2007. The revised draft for the second round
of views and comments will be released on November 15, 2007 and
open till November 30, 2007. The implementation of the code is scheduled
on January 1, 2008.
Any inquires or response may be sent to Mr. P. Samarasiri, Director
of Bank Supervision, Central Bank of Sri Lanka, Tel. 2477100, Fax.
2477711, e-mail. psamara@cbsl.lk. The exposure draft can be accessed
through the Central Bank’s website www.cbsl.gov.lk. A soft
copy may be released through e-mail if requested.
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