The banks should be prohibited from lending money to its retail customers to buy these debt or equity of the institutions themselves, recommends a task force set up by the Bank of Portugal to improve banking practices.
This is one of the recommendations, not binding, the working group on models and practices of governance, control and audit of the financial institutions, which is expected to result in a White Paper for the financial system, the bank central released today.
Another of suggestions aims to “prohibit the granting of credit to any member of governing bodies” and a third want a ‘sharp’ review the ceilings of the lending shareholders with qualifying holdings or . the entities controlled by them
Tidy eight areas, 36 recommendations aimed at responding to deficiencies detected at three levels: the “collective functioning of the board while oversight and balance of executive management,” “processes selection of non-executive members of these bodies “and” prevention of conflicts of interest involving related parties “.
The areas they are made, the recommendations are the corporate governance structures and top organ functions (with 7) adequacy of members of corporate bodies and senior managers (5), conflict prevention interests (7), remuneration (4) policies, internal control and internal audit (5) and government oversight institutions (6), there are two observations on the specific cases of Caixa Económica Montepio Geral and mutual agricultural credit banks .
The first of its recommendations relating to the first issue, the working group suggests “the promotion of knowledge and effective performance by the members of the board of normative functions that are assigned to that organ and members that compose it. “
Another proposal is even the” mandatory existence of a formal procedure for the selection of potential members of the board and senior managers “.
In this regard, a limitation is soon appointed, what is the “accumulation prohibition of executive management positions in the governing bodies of a credit institution with social positions in entities holding, directly or indirectly, shares qualified these credit institutions or those that control. “
Similarly, also argues that the holders of the President of the Board of Directors (” Chairman “) and the chief executive officer (CEO) which deals with the current management, can not be the same person.
Separate functions, select, train and monitor the holders of positions, formalize procedures in writing, stop positions of occupation of abuse for their own benefit and protect bank customers from bad practices of institutions are some of the concerns which are reflected the disclosed proposal, which is available on the Bank of Portugal on the Internet.
Coordinated by Rui Cartaxo, a central bank adviser, the group worked integrated experts in corporate governance, as well as University professors Catholic Lisbon, Faculty of Law, University of Lisbon and the Nova School of Business and Economics.
This report, as is pointed out in the release note, follows the assigned case BES.
RN // ARA
Lusa / End
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