CG
Code for Banks promotes robust risk management, financial stability
– CB
The Central Bank said that the mandatory corporate governance code
for licensed commercial banks aims to promote healthy and robust
risk management as well as financial stability.
“These rules have been designed to promote a healthy and robust
risk management framework for banks, with accountability and transparency
through policies and oversight by the boards of directors who along
with senior management, are responsible for the management of banks,”
the Bank said.
“The implementation of these Directions also provides an opportunity
to depositors, investors, and other stakeholders to monitor the
performance of banks,” it added.
“It is, therefore, envisaged that these Directions, formulated
after extensive consultation with relevant stakeholders, would improve
the governance practices of individual banks substantially and would
lead to improved confidence in the banking sector, thereby promoting
financial system stability,” the Bank said.
The Central Bank has issued Directions on Corporate Governance for
Licensed Commercial Banks and Licensed Specialised Banks in terms
of the provisions under Section 46(1) and 76 J(1), respectively,
of the Banking Act No. 30 of 1988. These Directions is effective
from January 1, 2008.
These Directions have been developed on the basis of certain fundamental
principles of corporate governance. The main aspects covered are
the broad responsibilities of the board, board’s composition,
criteria to assess the fitness and propriety of directors, management
functions delegated by the board, separation of duties of the Chairman
and Chief Executive Officer, board appointed committees in relation
to integrated risk management, audit, nomination, and human resource
and remuneration, related-party transactions and disclosure of financial
statements.
A number of transitional provisions on several key aspects of these
rules have been provided to facilitate smooth transition to these
new standards.
These Directions can be accessed through the Central Bank’s
website www.cbsl.gov.lk
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