In banking parlance, the Corporate Governance refers to conducting the affairs of a banking organization by following the best business practices, in such a manner that gives a fair deal to all the stakeholders’ i.e. bank customer, shareholders, regulatory authority, employees, society at large etc.
Day to Day management is the basic responsibility of the operating management i.e. team consisting of the Chief Executive and top management, functionaries supported by the operating staff. Corporate Governance is to create an environment that helps the operating management to improve the quality of the partners.
It covers a variety of aspects such as protection of shareholders’ rights, enhancing the shareholders’ value, issues concerning the composition and role of the Board of directors, disclosure requirements, accounting systems, putting in place effective monitoring mechanism etc.
There are a number of parameters on the basis of which the level of corporate governance can be a judge for a banking organization. It includes suggested model code for best practices, preferred an internal system, recommended disclosure requirements including the level of transparency, a role of Board of Directors and committees, reporting system to the Board of Directors, policies formulated by the Board and monitoring of performance.