Moves today by the Bank of England to improve the culture of Britain’s financial institutions have been welcomed by business leaders at the Institute of Directors. The Prudential Regulatory Authority, which sits inside the Bank, has launched a new consultation on corporate governance in the financial sector, just a day after several UK banks were fined hundreds of millions of pounds for their part in the foreign exchange market rigging scandal. Oliver Parry, Senior Corporate Governance adviser at the Institute of Directors, welcomed the report:
“This is a significant step forwards in recognising that the fiascos that have taken place in the financial sector, during the crisis and since, have originated in failures of governance. It’s very welcome that the PRA have clearly set out today that the board is not just responsible for setting company strategy, but also for building a culture of risk awareness and ethical behaviour for the entire organisation.
“It is particularly refreshing to see the PRA point to the importance of the "knowledge and experience" of non-executive directors. They are right to identify the crucial role that non-executives play in challenging the key strategic decisions of the business.
“We have been consistent in our calls for regulators to play close attention to how companies train and develop their NEDs. Specific attention needs to be paid to new board members. While NEDs often join boards with considerable experience, the may not always possess deep understanding of the business in question. Chairmen must ensure that all board members are given the necessary knowledge and training to perform their vital functions.”