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Friday, 13 December 2013 00:03 - - {{hitsCtrl.values.hits}}
that the human factor is crucial if this status is to be maintained.
Acknowledging that the global economic environment is ever changing, he noted that the role of directors in the banking sphere has materially increased over the past few years.
“Incredible is the fact that the roles and responsibilities of a director have increased dramatically in the recent past. While this has also triggered the intervention of policy makers and regulators, changing is also the role of moderators since the sector and economies are becoming complex. It is because of such changes that directors today are faced with a different mission,” said Grivel when speaking on the ‘Changing Role of a Bank Directors’ at the CBSL’s Bank Directors’ Symposium 2013 held yesterday in Colombo.
According to HSBC, he noted that the Board of Directors have to ensure that the business of banking is fair, transparent, sustainable and meet the core objective of serving society.
From a different perspective, governance today has become a central element in a bank’s value proposition.
What is striking, he said, is that a large number of investors are now setting up specialised units to analyse, discuss, and challenge corporate governance as they see this as in input when evaluating the institution.
Responsible
“Clearly today the individual directors of the board have responsibilities to a very large number of stakeholders and also to their employees. This is because it is the board, along with the CEO, that sets the corporate culture and the value proposition of the bank,” noted Grivel at the event which was graced by CBSL Governor Ajith Nivard Cabraal as chief guest.
According to him, complexity is not going to stop. In fact it is going to continue and become more complex. As the financial crisis has raised the bar in an exponential fashion for the board of directors, financial disclosures today have become their responsibility.
“It is not technical anymore. It is about judgments. It is how you would adapt a certain policy to a situation. It is asking the directors to exercise their judgment while ensuring the rules are applied. This is no more the privilege of auditors but the directors on the board,” Grivel told the audience that was filled with top heads of local banks.
Furthermore, he emphasised that managing the bank is not the role of the board; it is the role of the executives. In the current contest, the role of a board is to set the mission, value statement, and provide frameworks for the business model and 
performance indicators.
As financial shocks come unannounced and from all directions, the board of directors are faced with, and should look at a number of risks such as liquidity, market, and operational risks in addition to credit risk. While these risks can come in many forms and is certainly not easy to pinpoint, Grivel stated that the risk tolerance level should be set by the board.
“Being a director is no more a walk in the park. It is increasingly demanding in time and commitment,” he said.
Independence
Elaborating further, Grivel stressed the need for directors to be independent. It is crucial that directors are free of conflicts so they are able to express their opinion in an independent manner. In terms of transparency, this he said is an obvious feature and duty that directors cannot escape.
Pointing out the need for being on the top of business activities and processes, real-time commitment is needed from the board members in this regard, he said. Sharing the practice of the successful HSBC in this arena, he pointed out that the bank carries out over 15 training sessions a year to ensure that its boards are aware of the business and how it’s performing in comparison to other international leading banks.
Banks now have more than before a role to play in the society as it is them who finance the economy, consumers and companies, allowing them to realise their dreams. This means that directors have to provide to the executives the external perspective and ensure these are taken into account when policies are set.
“The board is a team and college of directors and therefore there is a need to achieve team dynamics. There is also the need to exercise the art of speaking up and debating. When looking back at some of the banks that have not performed well, it is often because of the issues that were terminated by groups and individuals. That is a missed opportunity and therefore it is necessary for the directors to create an environment where matters will be debated and spoken. This is important. These are not rules, but strategies,” explained Grivel.
