The final recommendations of Sir David Walker in relation to corporate governance in UK banks and other financial industry entities has been published. The final report suggests a series of reforms to strengthen the role of shareholders, improve the quality of bank boards, and to increase transparency of pay and bonus structures.
HM Treasury has issued a press release stating that the Government will move quickly to implement the reforms. The Chancellor of the Exchequer, Alistair Darling, said:
"One of the fundamental causes of the financial crisis was bad management of some of our major banks. Too many people around board tables did not ask the right questions; some chief executives did not fully understand the risks being taken by their traders; pay and bonuses encouraged reckless risk taking instead of responsible behaviour. Banks failed because some of the top people running banks failed to do their jobs.
Tougher regulation, including stronger capital and liquidity requirements, reform of the mortgage market, greater competition, consumer protection, and living wills will help make our system safer for the future. But the culture of the banks themselves must change.
Sir David’s proposals are the blueprint for how banks must be run in the future. His interim report recommended changes to control bonuses that have already become part of a global standard agreed by the G20. The Government strongly supports his recommendations and will begin immediate work to implement them."
The FSA has also issued a short statement on the final recommendations of Sir David Walker. The FSA welcomes Sir David’s final report and notes that:
- Many of the recommendations complement the work the FSA is already carrying out, such as the increased focus on the quality of governance and risk management at FSA regulated firms. The FSA is to publish a further Consultation Paper on governance and approved persons early next year.
- Sir David’s recommendations are broadly consistent with the FSA’s existing remuneration code. The FSA reiterates its commitment to reviewing its remuneration code next year in order to take any international developments into account. This review will also consider whether, and how, to implement Sir David’s wider recommendations on remuneration.
- On shareholder engagement, on the conclusion of the Financial Reporting Council’s consultation on the ‘Stewardship Code’ the FSA will consult upon a rule introducing a ‘comply or explain’ disclosure requirement for relevant investment management firms.
View A review of corporate governance in UK banks and other financial industry entities, 26 November 2009
ViewGovernment to implement Walker reforms on pay and governance, 26 November 2009
View FSA statement: re Walker Review, 26 November 2009