Role of Board of Directors in Strengthening Corporate Governance in Banks

1. Role of Board of Directorsin Strengthening Corporate Governance in Banks

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

3. 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

4. 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

5. 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

6. 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

7. Responsibilities – Policy Framework • Formulating policies : • Credit • Investments and Treasury Management • Human Resources • Internal Audit and Control • Compliance • Risk Management • Other areas • Communication and compliance

8. 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

9. 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

10. 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

11. Responsibilities - Others • Reviewing the effectiveness of Internal Controls • Strengthening Risk Management

12. Responsibilities - Others • Annual Financial Statements : - Coverage of Directors’ Report - Statement on Internal Controls - Risk Management Framework

13. Responsibilities - Others • IRAF Reporting • Regulatory compliance • Basel-II implementation

14. Thank You