Strengthening corporate governance in the banking sector

The EBRD has helped in setting up guidelines to improve board practices, disclosure and risk management in the banking sector of south-eastern Europe.

The global financial crisis has uncovered the weakness of corporate governance practices in banks and other financial institutions. One of the main factors that contributed to the crisis is considered to be the use of inadequate risk management systems in important financial institutions.

Reviewing governance practices

Today corporate governance in the banking sector is being reviewed not only in the countries where the crisis originated but also in transition economies with the aim of providing banks with sound corporate governance practices.

The EBRD’s Legal Transition team, together with the International Financial Corporation (IFC) and with donor funding provided by Luxembourg, organised two conferences in 2009 and 2011 on Corporate Governance of Banks in south-eastern Europe (SEE). The forum regrouped representatives of banks and regulators in SEE as well as international experts to develop a set of guidelines aimed at strengthening the corporate governance of the sector in this region.

The discussions held at these meetings have been gathered into a Policy Brief. Its purpose is to support policy-makers, banking supervisors, banks and banking associations in their work of strengthening corporate governance practices. The Brief includes an overview of bank corporate governance in SEE and recommendations on how to improve board practices and transparency, internal and external audit and risk management practices.

Setting the right model

With a relatively developed banking sector and well-experienced banking regulators, SEE banks can play an important role in underpinning economic stability and growth in the region. Good corporate governance of banks is essential to maintain their proper functioning. In addition, SEE banks are often in a position where they can influence the corporate governance of their corporate borrowers.

The Policy Brief can help SEE banks not only improve their own governance but also to become role models for other companies in the region.