The implementation of the European Banking Authority’s guidelines on internal governance : one year on

Abstract

Sound corporate governance is key to the safety, solidity and success of the banking sector. Weaknesses in corporate governance in a number of institutions have contributed to imprudent and excessive risk-taking which has led to the failure of a number of banks in Europe and globally. Maltese banks have not been spared from their fair share of problems which could have been avoided had there been sound and strong governance structures and risk management practices in place. In order to address the potentially detrimental effects of inadequate corporate governance arrangements and improper risk management and furthermore in order to take into account the new requirements introduced in the CRD in this area, the European Banking Authority updated its Guidelines on Internal Governance in September 2017. The guidelines are intended as a means to harmonise internal governance arrangements, processes and mechanisms across banks in the European Union. The EBA guidelines came into force in June 2018 and accordingly the time is ripe to assess the impact of their implementation on the Maltese banking sector. The dissertation seeks to ascertain the experience of local banks one year on. Besides an extensive literature review, fieldwork and information gathering will include a questionnaire with the largest local retail banks in relation to the major steps they have taken in order to comply with the EBA’s Guidelines on Internal Governance and in order to ascertain their effectiveness on improved governance.