IFAC Response to Basel Committee on Banking Supervision Consultation Paper: Corporate Principles for Banks
IFAC believes good governance, risk management, and internal control are fundamental to the effective functioning of the world’s capital markets and to organizations, including banks in particular, in creating sustainable value for their stakeholders. Overall, IFAC welcomes enhancements to the Basel Principles as they aim to strengthen risk governance, clarify the role of the board of directors in this regard, emphasize board competence, provide guidance for bank supervisors, and point out the influence of compensation systems.
However, the guidelines provided under the Principles are typically very detailed and prescriptive, which might promote a compliance culture rather than a values-based and behavioral route to better governance, risk management, and internal control across the organization. Arguably, such compliance efforts might draw attention and resources away from those areas where they should more appropriately be directed (i.e., “form over substance”). In that light we suggest that consideration be given to presenting the guidelines at a higher level, describing principles more focused on desired outcomes and less on detailed implementation guidance to achieve those outcomes.
