Commission consultation on Green Paper on corporate governance in financial institutions
02 June 2010
The Commission consultation deals with issues that include how to improve the functioning and the composition of boards of financial institutions in order to enhance their supervision of senior management or how to establish a risk culture at all levels of a financial institution.
In response to the financial crisis, the Commission committed itself in its March 2009 Communication on "Driving European Recovery" to improving corporate governance in financial institutions. The Commission wanted to ensure that the interests of consumers and other stakeholders are better taken into account, businesses are managed in a more sustainable way and bankruptcy risks are reduced in the longer term.
As a first step, the Commission is now launching a public consultation on a Green Paper that details possible ways forward to deal with the following issues:
1. How to improve the functioning and the composition of boards of financial institutions in order to enhance their supervision of senior management;
2. How to establish a risk culture at all levels of a financial institution in order to ensure that long-term interests of the business are taken into account;
3. How to enhance the involvement of shareholders, financial supervisors and external auditors in corporate governance matters;
4. How to change remuneration policies in companies in order to discourage excessive risk taking.
The consultation is open until 1st September 2010. Any future legislative or non-legislative proposals will be adopted in the course of 2011.
Background: The financial crisis revealed significant weaknesses in corporate governance in financial institutions: board supervision and control of management was insufficient; risk management was weak; inadequate remuneration structures for both directors and traders led to excessive risk-taking and short-termism; and shareholders did not exercise control over risk-taking in the financial institutions they owned. These weaknesses played a role in the crisis and timely and effective checks and balances in governance systems would help preventing any future crisis.
© European Commission
