| During the past twenty-five years the focus was on | | | | relationships and attitudes that undermine governance |
| attention to the application principles of corporate | | | | specially conflicts of interest such as lending to the |
| governance in banks as a result of the rapid | | | | staff or managers or shareholders who have control |
| developments in financial markets and the | | | | or majority. |
| globalization of financial flows and technological | | | | The third principle: - The BOD must establish clear |
| progress, which led to the pressures of an | | | | lines of responsibility and accountability in the bank to |
| increasingly competitive between banks and | | | | themselves and to senior management and develop a |
| non-bank, also led to a rapid growth in the financial | | | | management structure encourages accountability and |
| markets and a wide variety of financial instruments | | | | responsibly. |
| to banks, which increased the importance of risk | | | | The fourth principle: - BOD Should ensure of the |
| measurement and management and control, which | | | | existence of the principles and concepts of executive |
| requires continuous innovation to business and ways | | | | management in line with the Board's policy and |
| of managing risk and change the laws and surveillance | | | | officials owned the skills necessary to manage the |
| systems so as to maintain the integrity and strength | | | | Bank's business and that is the Bank's activities in |
| of the banking system. Since banks differ from other | | | | accordance with policies and regulations established |
| institutions because the collapse of banks affect a | | | | by the Board of Directors and in accordance with an |
| wider circle of stakeholders resulting in a weak | | | | effective system of internal control. |
| financial system itself which lead to adverse effects | | | | The fifth principle: - The independence of auditors |
| on the economy as a whole, placing a special | | | | and the functions of internal control shall be approved |
| responsibility to the members of the Board of | | | | by BOD as essential to the governance of banks in |
| Directors. | | | | order to achieve a number of control functions to |
| The Bank for International Settlements has been | | | | test and confirm the information obtained from the |
| defined the governance in banks as the methods & | | | | senior management for operations and performance |
| approaches used to manage banks through the board | | | | of the bank, senior management must recognize the |
| of directors and senior management which determine | | | | importance of audit functions and the effective of |
| how to put the bank's objectives, operation and | | | | internal and external control for the safety of the |
| protect the interests of shareholders and | | | | bank on the long-term |
| stakeholders with a commitment to act in | | | | Principle VI: - BOD Should ensure that the policies of |
| accordance with existing laws and regulations and to | | | | remuneration commensurate with the culture, |
| achieve the protection of the interests of depositors. | | | | objectives and strategy of the bank in the long term |
| Principles of corporate governance in banks: | | | | and linked to incentives of senior management and |
| Basel Committee issued a report on strengthening | | | | executives to the bank's long-term objectives. |
| governance in banks in 1999 and then issued a | | | | Principle VII: - Transparency is necessary for |
| modified version of it in 2005 In February 2006, the | | | | effective and sound governance, according to the |
| updated version included the following: - | | | | Basel Committee Guide on transparency in the banks, |
| The first principle: - members of the Board of | | | | it is difficult for shareholders and stakeholders and |
| Directors Must be qualified to fill positions and they | | | | other market participants to observe correctly and |
| have fully aware of the governance and the ability to | | | | efficiently the performance of the Bank's |
| manage in the bank, and the members are fully | | | | management in light of lack of transparency, and this |
| account for the bank's performance and integrity of | | | | happens if there is no sufficient information to |
| its financial position and strategy formulation in the | | | | shareholders and stakeholders about the ownership |
| bank and the policy of risk and avoid conflicts of | | | | structure of the bank and its objectives, timely & |
| interest and move away themselves from the | | | | adequate market disclosure will achieve market |
| decision-making When there is a conflict of interest | | | | discipline, and be disclosed in a timely and accurate |
| makes them unable to perform their duties to the | | | | through the Bank's website and in annual and periodic |
| Bank, and to do the restructuring of the Board which | | | | reports, and be tailored to the size and complexity of |
| includes the number of members, encourages greater | | | | the ownership structure and size of the Bank's |
| efficiency, duties and powers include the selection | | | | exposure to risk, or what If the bank registered in |
| and control and the appointment of executives to | | | | the stock market, and in the information that must |
| ensure the availability of talent capable of managing | | | | be disclosure of information relating to the financial |
| the bank, The Board of Directors responsible for | | | | statements, exposure to risks, issues related to |
| establish committees to assist them, including the | | | | internal audit and governance in the bank, including |
| executive committee and internal review to take | | | | the structure and qualifications of board members, |
| corrective decisions in time and to identify | | | | managers, committees and the structure of |
| weaknesses in control and non-compliance with | | | | incentives and wage policies for staff and managers. |
| policies, laws and regulations. In addition to the Risk | | | | Eighth Principle: - Members of BOD and senior |
| Management Committee sets out the principles for | | | | management Should understand the structure of the |
| senior management on the management of credit | | | | Bank operations and the regulatory environment in |
| risk, market - liquidity, operational, reputation and | | | | which it operates which can be exposed the bank to |
| other risks, also the pay commission committee that | | | | legal risk indirectly when doing services on behalf of |
| sets the pay systems and principles of the | | | | its clients who use the services and activities offered |
| appointment of executive management and the Bank | | | | by the Bank for the exercise of illegal activities, |
| officials, in line with the objectives and the Bank's | | | | putting the bank reputation at risk. |
| strategy. | | | | In conclusion, the application of corporate governance |
| The second principle: - Members of the BOD have to | | | | in banks leads to positive results: increase in funding |
| approve and monitor the strategic objectives of the | | | | opportunities and lower cost of investment and |
| Bank and the values and standards of work with the | | | | financial market stability, and reduce corruption. The |
| interests of stakeholders and that these values are | | | | application of the principles of corporate governance |
| valid in the bank, and should ensure that the | | | | to the lower degree of risk when dealing with banks |
| executive management implements strategic policies | | | | and reduce defaults. |
| of the Bank and prevent the activities and | | | | |