Dissertation Writing Help on Corporate Governance Practices in Banking Sector in India
Corporate governance refers to a “set of legal, cultural and institutional arrangements, and how the control is exercised, and how the risks and returns are allocated.Corporate governance is the system by which business corporations are directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as, the board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. By doing this, it also provides the structure through which the company objectives are set, and the means of attaining those objectives and monitoring performance.
Weak and ineffective corporate governance mechanisms in banks are pointed out as the main factors contributing to the recent financial crisis. Deep changes in this area are necessary to reinforce the financial sector stability. The paper presents key aspects requiring reforms: the role, constitution and accountability of board, risk management, management remuneration, transparency. New regulations and guidance are presented, creating the foundations for a new order of the financial market. The paper also points out the banks’ stakeholders’ accountability.
Research Writing Help in Corporate Governance Practices in Banking Sector in India
The board of directors is the first level of supervision over the activities of the bank and its management. The board is ultimately responsible for the activities and results of the bank, for the maintenance of stability and financial soundness. The powers and rules of the board are specified in the law and the statute of a bank. The mode of operation should be specified in the rules of procedure of the board.
The core competences of the board forming the foundations of the bank activities include: approving and overseeing the strategic objectives of the bank and its corporate values, overseeing the work of the management board and the determination of the scope of the obligations and liability of the management members, the establishment of guidelines for the acceptable level of risk, overseeing the introduction of the management system (consisting at least of the system of risk management and internal control system), and assessment of the adequacy and effectiveness of the system.
If these tasks are to be performed, certain conditions concerning the organization of the council and its members must be duly met. In this first issue the question of the creation and functioning of the committees of the board should be taken into account in particular.
Risk is the inherent feature of bank’s activities; bank management is indeed risk management. Proper management of the risks incurred by the bank provides for its survival on the market and financial success. Regulations impose standards limiting the bank risk and requiring adequate equipment in the capital to absorb losses due to materialization of this risk.
In addition, recommendations and standards provide guidance for the banks concerning the main stages of the process of risk management: identification, measurement, control and monitoring. Peculiarities of the development of markets and financial instruments cause that those first are not able to take account of all the details and options, quite quickly become outdated and do not correspond to reality.
Banks led by the desire for profits can easily use the gaps in legislation and expose themselves to risks without incurring regulatory consequences. However, if the bank inadequately calculates its capital needs, and the supervisory bodies are not able to catch it early and discipline the bank to take appropriate action, it could threaten the solvency of that entity and cause its bankruptcy.
Bank transparency has several aspects. The most important is the question of transparency in the activities of the bank and its management and the issue of transparency (and understandability) of reports on the activities of the bank and its results. The question of transparency of the activities of the bank is to a considerable extent linked with its established organizational structure. If complex structures (e.g. enhanced capital group and special purpose entities — SPV) are implemented, the responsibility is blurred, transferring income,
cost and risk is easier. Similar effects can be caused by an implementation of matrix structures in related banks. This limits the powers of the management structure for a subsidiary bank (decisions are taken by the heads of the divisions at the central level, this means full dependence on the owner) and makes it more difficult for an overall evaluation of the risk of individual participants of such a holding company.
Non-transparent structures give rise to additional risk (financial, legal, or reputation) and impede adequate control and supervision (in particular with regard to separated and outsourced areas and matrix dependence). The bank therefore strives to ensure clarity of structures and links, to gain a complete picture of the results and the risks incurred by the bank (as a whole and the individual divisions/units).
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