Role of Board of Directors

in Strengthening
Corporate Governance in
Banks

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 Role of the Board of
Directors
 Setting Tone at the Top
 Defining Business Philosophy

2
 Independence of Board
 Independent of the influence of Management
 Clearly know their responsibilities and powers
 Focus on Policy Making and general direction
 No role in day to day affairs
 No conflict of interest
 Understand the bank’s risk profile
- training programs for Board members

3
 Board Sub-committees
 Preferably comprising non-executive board members,
in the areas of:
– Audit
– Risk Management
– Human Resource
– Credit
– Others
 With well defined objectives, authorities and tenure
 Without indulging in day to day affairs
 Full board to review their performance
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 Responsibilities of Board
 Setting the:
– Objectives
– Vision and Mission statement
– Strategy & Business Plan
 Providing oversight to ensure achievement of
organizational objectives
- within the legal and regulatory framework
and high business ethics
 Standing accountable to stakeholders
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 Responsibilities (Contd.)

 Appointing key executives – based on

FPT criteria
 Defining powers and responsibilities of
senior management
 Succession planning for key positions
 Disclosing conflict of interest
 Ensuring disclosure to promote
transparency and market discipline
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 Responsibilities –
Policy Framework
 Formulating policies :
– Credit
– Investments and Treasury Management
– Human Resources
– Internal Audit and Control
– Compliance
– Risk Management
– Other areas
 Communication and compliance
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 Responsibilities – Internal Audit

 Creation of separate department of

Internal Audit, with
– Professional Staff
– Full Scope coverage
– Audit Charter & Manual
 Head of Internal Audit reporting to the
board or the Audit Committee
 Appointment and remuneration of Head of
Internal Audit
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 Responsibilities - MIS
 Ensuring existence of an effective Management
Information System
 For keeping itself abreast with
– Activities
– Operating Performance & financial condition
– Operating environment
– Major Risks
 Evaluating Performance of the management -
based on certain benchmarks

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 Responsibilities – Board Meetings

 At least quarterly, preferably more

frequently
 Individual Directors to attend at least
half of the meetings in a year
 Information through agenda items in
advance
 Recording minutes of deliberations in
detail
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 Responsibilities - Others

 Reviewing the effectiveness of

Internal Controls
 Strengthening Risk Management

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 Responsibilities - Others

 Annual Financial Statements :

- Coverage of Directors’ Report
- Statement on Internal Controls
- Risk Management Framework

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 Responsibilities - Others
 IRAF Reporting
 Regulatory compliance
 Basel-II implementation

13
Thank You

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