The Inside Scoop—What Stakeholders’ Think of Corporate Governance in Financial Institutions

Abstract

Financial institutions particularly banking business operations are mainly characterised and often viewed as driven by opacity and increased complexities within an organisation. A key objective of reporting is to promote transparency and accountability by enhancing the quality of disclosure, by reducing information asymmetry. Good quality corporate governance disclosures have a number of potential benefits for stakeholders. It must, however, be recognised that disclosure in itself would not enhance transparency if it appears to lack useful and meaningful information for shareholders, depositors, market analysts, regulators and other stakeholders. This chapter investigates from the perspective of broader stakeholders relevant of financial organisations’ corporate governance and disclosure issues with regard to information richness on a longitudinal basis. The issue of corporate governance does not just exclusively effect banking organisations, but is a wider reaching challenge faced by multiple institutions across the wider financial market. This chapter also investigates the similarities and differences in governance and accountability issues in a selection of other financial institutions (non-banking) across the globe. The aim is to see if there are any wider learnings that policymakers could adopt to improve best practices of corporate governance of other financial institutions overall. In addition, the chapter aims to cover important suggestions including clearer separation of the management and control function; the need for the establishment of a separate risk committee of the board or an independent chief risk officer; dealing with the problem of complex or opaque structure and organisation and group-wide corporate governance in single entities as well as in the group. Suitable supervisory law conditions are needed for the internal procedures of other financial institutions, specifically for risk management, internal control and compliance, and both internal and external auditing. This chapter analyses from the perspective of legal, economic and comparative investigation and covers the corporate governance issues and reforms by the United Kingdom, United States, European Commission, the European Banking Authority, CDR IV and Solvency requirements that may affect other major non-banking financial institutions (for example, insurers, investment firms and asset managers).