Corporate Governance In Financial Institutions

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With the increase use of information technology and office automation, the information requirement of the financial institution, management and investors has enhanced into many fold. It is a known fact that vital needs of success of any organization depends on its ability to mobilize and utilise all kinds of resources to meet the objectives clearly set as part of the planning process. Both internal and external factors are necessary for well management of financial institution, the latter include availability, cost effectiveness; technological advancement. Increasingly, revelations of deterioration in quality and transparency, have called for adoption of internationally accepted ‘Best Practices’. Corporate governance is about ethical conduct …show more content…

Effective corporate governance practices are essential in achieving and maintaining public trust and confidence on the financial institutions, which are critical to the proper functioning of the institutions and economy as a whole. Poor corporate governance result into failure in financial institutions, which can pose significant public costs and consequences due to their potential impact on any applicable deposit protection systems and the possibility of broader macroeconomic implications, such as contagion risk and impact on payment systems. In addition, poor corporate governance can lead markets to lose confidence on the ability of financial institutions to properly manage its assets and liabilities, including deposits, which could in turn trigger a financial institutions run or liquidity crisis. Indeed, in addition to their responsibilities to shareholders, financial institutions also have a responsibility to their …show more content…

I. Quality and concentration of ownership
The ownership issue in financial institution includes a few crucial matters that have been engaging our attention and a policy environment is being sought to be created that would confirm to the best principles of governance. Unique corporate governance challenges are posed where the ownership structure lacks transparency or where there is insufficient checks and balances on inappropriate influences of controlling shareholders. While there can be different views on the issue of concentrated ownership, there is clearly recognition that significant shareholders should pass the fitness and propriety tests.

II. Quality of management
Senior management consists of a core group of individuals responsible for the day to day management of the financial institutions –should have necessary skills and oversee line managers in specific business areas and activities consist of policies and procedures laid down by the Board.
Senior Management establishes effective system of internal

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