Report: "Governance of Financial Institutions" from CSIS, IIF, and American Assembly
March 31, 2010
WASHINGTON, March 31, 2010 – The Center for Strategic & International Studies (CSIS) Hills Program on Governance, The American Assembly at Columbia University, and the Institute of International Finance (IIF) today issued a report entitled, “Governance of Financial Institutions.”
Please find a link to the full report below:
An Overview of the Report
The Report is a collation of the views expressed at a colloquium held in New York City last year on November 3rd and 4th by 55 participants from international financial institutions, major accounting and law firms, academia, media and policy institutes, including seventeen who chair or who have chaired relevant regulatory agencies. Paul A. Volcker, Chairman of the President’s Economic Recovery Advisory Board, provided the opening talk of the colloquium. Judge Richard Posner of the U.S. Court of Appeals for the Seventh Circuit was the other principle speaker.
Opinions expressed at the colloquium concerned the structure and performance of corporate boards, the quality of risk management by regulatory and corporate officials, the compensation of executives and the responsibility of regulatory agencies to influence such governance issues
Many participants stated that the severity of our financial crisis has been aggravated by lax corporate governance policies at many financial institutions. One speaker blamed the collapse on a crisis of competence. Others said that the boards of many financial institutions must take substantial steps to improve their oversight of financial institutions. Directors, they said, must devote more time to their responsibilities, have more skills and expertise and exercise considerably more control over compensation matters. Participants expressed a widespread view that risk management policies have been inadequate in many financial institutions. Others argued that corporate risk officers must report to board risk committees and have stature at least comparable to that of the chief financial officer. Similar concerns were expressed about the shortcoming of regulatory oversight. Broad support was given for greater training that can substantially enhance the expertise of those who regulate financial institutions.
While most participants did not comment on current proposals to reform the regulation of financial institutions, several did suggest that the U.S. Government needs to become more expert in understanding what went wrong before reform legislation is finalized. Particular concern was expressed about the possibility that action taken in the United States may conflict with action taken by other countries.
The Center for Strategic and International Studies (CSIS) is a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions; accordingly, all views, positions, and conclusions expressed in these publications should be understood to be solely those of the authors.
The Institute of International Finance, Inc. (IIF) is the world’s only global association of financial institutions. Its 380 members, headquartered in more than 70 countries, include most of the world’s largest commercial banks and investment banks, as well as a growing number of insurance and investment management firms. The IIF mission is to support the financial industry in prudently managing risks in developing best practices and standards; and in advocating regulatory, financial and economic policies that are in the broad interest of its member and that foster global financial stability.
The American Assembly, founded by Dwight D. Eisenhower in 1950, and affiliated with Columbia University is a national, non-partisan public affairs forum that illuminates issues of public policy through commissioning research and publications, sponsoring meetings, and issuing reports, books, and other literature. Its topics include national domestic and foreign policy. Its projects bring together leading authorities representing a broad spectrum of views, interests, and background.