In October 2011 the Basel Committee on Banking Supervision (BCBS) published Principles for enhancing corporate governance (the Principles). The Principles sought to reflect key lessons from the 2008-09 global financial crisis, and enhance how banks govern themselves and how supervisors oversee this area.
To assess how national authorities and the banking industry had developed their approach to risk governance since the global financial crisis, the Financial Stability Board (FSB) issued a Thematic review on risk governance in February 2013. The peer review found that financial institutions and national authorities had taken measures to improve risk governance but further work was needed. In particular national authorities needed to strengthen their ability to assess the effectiveness of a bank’s risk governance and its risk culture and engage more frequently with the board and its risk and audit committees.
In light of on-going developments in corporate governance, and to take account of the FSB peer review the BCBS has published a consultation paper seeking to update the Principles. One of the primary objectives for the revision is to explicitly reinforce the collective oversight and risk governance responsibilities of the board. Another important objective is to emphasise key components of risk governance such as risk culture, risk appetite and their relationship to a bank’s risk capacity. The updated Principles also delineates the specific roles of the board, board risk committees, senior management and the control functions including the chief risk officer and internal audit.
The deadline for comments on the consultation paper is 9 January 2015.