Enhancing Corporate Governance for Financial Institutions: The Role of International Standards

The threat of systemic risk in international financial markets necessitates the establishment of universal standards for corporate governance of financial institutions. This paper addresses some important issues and concepts in the governance of multinational financial institutions and why international standards are needed to guide financial institutions in assessing and protecting against risk in financial markets. It acknowledges that different structural approaches to corporate governance exist across countries, and encourages practices which can strengthen corporate governance under diverse structures. An important task for supervisors and regulators is to ensure that incentives exist to encourage senior bank management to adopt good regulatory practices that approximate the economic risk exposure of the financial institution. This paper analyses corporate governance within framework of international financial markets and how international standards can be applied in a way that can effectively reduce systemic risk.