Handbook for Directors of Financial Institutions

Handbook for Directors of Financial Institutions

Elgar original reference

Edited by Benton E. Gup

Offers advice from existing directors, scholars and regulators about what good directors need to know. The Handbook for Directors of Financial Institutions offers the practitioner and the scholar a comprehensive guide to what it takes to survive and thrive as a director of a financial institution. The authors comprise current directors of banks, credit unions, insurance companies and other organizations, bank regulators, lawyers and academics. They provide unique insights and advice about corporate social responsibility, legal risks, starting a new bank, D & O insurance, sub prime lending, Islamic banking, and other timely issues.

Chapter 4: Improving Director Oversight of Compliance: A Bank Regulator’s View

Cathy Lemieux and Steven VanBever

Subjects: business and management, corporate governance, economics and finance, corporate governance, financial economics and regulation, law - academic, corporate law and governance, finance and banking law

Extract

Cathy Lemieux and Steven VanBever1 Introduction Ensuring compliance with banking laws and regulations is one of the most important responsibilities of bank directors. Director oversight of compliance has become increasingly challenging in recent years, in part because directors’ other responsibilities have required more time and increased skill-sets, leaving less time and energy for overseeing compliance: ● ● ● Oversight of strategic planning has become more challenging because the business of banking has become more demanding and competitive; Corporate governance has become more challenging because expectations in this area have risen significantly in the wake of Enron and other scandals; and Oversight of financial risk management has become more challenging because risk management has greatly increased in sophistication. The dramatic increase in the volume and complexity of banking laws and regulations has also made director oversight of compliance more challenging. This chapter surveys each of these trends and recommends that bank directors understand and consider enterprise-wide approaches to compliance risk management and adapt them, as appropriate, to their institutions. This would help focus directors’ time and energy on the most important compliance risks facing the bank. Ensuring compliance with banking laws and regulations is one of the most important responsibilities of bank directors Ensuring compliance with banking laws and regulations is included among the following key responsibilities of directors as detailed in the Federal Reserve’s examination manual for commercial banks:2 ● Selecting competent executive officers (including retention, management-succession planning, performance evaluation, and compensation); 44 Improving director oversight of compliance ● 45 ● ● ● ● ● ● Effectively...

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