Board committees in Maltese banks : an analysis

Abstract

Purpose: Due to the increased complexities involved in the running of credit institutions, Boards are likely to place greater reliance on established committees with regards to strategic decisions and oversight of activities. Thus, Board committees are an essential element of the internal governance of banks. In this context, this dissertation sets out to obtain an understanding of the Board committees set up by Maltese banks. Design: The objectives of the dissertation were achieved through an examination of the relevant literature on Board committees, the conduct of semi-structured interviews (9), and a review of the annual reports for the banks under study (7). Findings: The study shows that Board committees have a significant role to play in the governance of local banks by performing several monitoring and strategic functions. Maltese banks recognise that Board committees make a positive contribution, but are also conscious of the fact that the existence of such committees portrays increased accountability irrespective of the actual work undertaken. Conclusion: The study concludes that Maltese banks establish Board committees in accordance with local Corporate Governance (CG) principles, with the main divergence being the absence of nomination committees. It is also suggested that better practice can be achieved through adherence to a CG framework. Moreover, it is perceived that local CG principles in their current form are flexible enough to allow banks to operate at their discretion. Value: This study should hopefully provide a detailed understanding of the Board committees established by Maltese banks and determine their potential to add value within the internal governance structure of such institutions. Some of the recommendations of the study include the establishment of a nomination committee and further enforcement by the MFSA with regards to adherence to local CG principles.