Corporate Governance of Banks

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Contents
Introduction......................................................................................................................................2
Corporate governance mechanism...................................................................................................2
Corporate governance mechanism in bank:.................................................................................3
Corporate governance mechanism of HSBC bank:.....................................................................7
Corporate governance mechanism of standard chartered bank:..................................................9
Conclusion.....................................................................................................................................13
References......................................................................................................................................14

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Introduction
Corporate governance is the important factor for well-being functioning of the banks. In order to
improve the bank’s performance, protect the stakeholder’s interests and improve compliances
with laws and regulations and code of conduct that are applied to banking industry, banks need
to conduct its operations which are based on the principles of virtuous company governance.
In the report, the corporate governance mechanism in banks is highlighted. Along with this,
financial risks that evolved from internal and external corporate governance mechanisms are
evaluated. For better knowing of corporate governance mechanism in banks the HSBC and
Standard chartered banks from United Kingdom is selected.
Corporate governance mechanism
Corporate governance is the set of frameworks, standards and procedures by which an
organization is represented. They set the rules about how the organization can be controlled or
coordinated to such a point that it can satisfy its destinations and goals in a way that increases the
value of the organization (Fernando, 2010).
Corporate governance depends on principles, for example, leading the business with all
reasonableness and uprightness, being open about all exchanges, making all important decisions
and disclosures, following each one of the law that must be adhered to, obligation and
responsibility towards the stakeholders and promise to leading company in a moral way
(Thomson, 2009). One more point, which is featured in the UK report of corporate governance,
is the necessary for those in control to be able to differentiate between what are private and
company funds while controlling and managing the company (De Haan and Vlahu, 2015).
Effective corporate governance mechanism helps to eradicate the banking scandals, which
weakens the corporate governance. There is an example of Barclay in UK who does banking
scandal that discloses weak corporate governance (Hagendorff, 2015).
The Barclays’s employees battered their positions of trust for the sake of company, indirect
personal advantage was corrupts ethical behavior, and permits free investigation. Barclays paid
charge of £290 million to resolve investigations by supervisors of United Kingdom into

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endeavored influence of the London interbank existing offered rate. This was a dreadful
disappointment by a larger financial organization of UK to conduct its businesses by following
the ethical standards. Its management and leadership widely committed to maintain in that year.
The senior management and board of the company were held responsible. It also disturbed
another banks in United Kingdom and undermined confidence of public in the bank’s
transparency and integrity. This case depicts weaknesses in corporate governance and the
necessity to reorganize that will increase transparency, accountability and lessen the incentives
for corrupt behavior.
For restoring confidence, Barclays commissioned a free investigation into what comes wrong,
why it comes wrong, what process company adopt, who was accountable to develop their
corporate governance.
Figures that highlights scandal story:
Major lenders Complaints received
(per month)
Complaints raised to
FOS (per month)
Percentage of
complaints supported
by FOS
Barclays 46,700 3,300 93%
HSBC 17,100 800 66%
This is how Barclays manipulate Libor to its advantage.