Last week the PRA issued two documents, a supervisory statement (SS5/16) and policy statement (PS13/16), both of which focus on corporate governance and in particular, board responsibilities. Both statements are complimentary to each another.
PS13/16 sets out the PRA’s response to feedback received on Consultation Paper 18/15 ‘Corporate Governance: Board Responsibilities’, which was published in May 2015 and provides a summary of steps taken to date. PS13/16 also outlines some of the contents of SS5/16 – certain terms have been amended and the PRA has taken on board suggestions from some respondents that the PRA provide further detail on how directors can reconcile their collective and individual responsibilities.
SS5/16 emphasises the responsibilities shared by board members as well as highlighting that good governance is critical to delivering a sound and well-run business. SS5/16 recognises that failures of governance and a failure to manage risks by boards has contributed to financial setbacks in recent years. Consequently, SS5/16 is designed to highlight key issues boards need to consider going forward. SS5/16 goes into more depth than PS13/16 and states that whilst it is not intended as a comprehensive guide for boards as to what constitutes effective governance, it does suggest that there are certain areas the PRA regard as especially important. They include:
- setting strategy
- risk appetite, management and interim controls
- Board composition
- the respective roles of executive and non-executive directors
- knowledge and experience of non-executive directors
- the Board’s time and resources
- management information and transparency
- succession planning
- subsidiary boards
- Board committees