On 21st May 2015, the PRA published their consultation paper, CP18/15 Corporate Governance Board Responsibilities. The paper proposes a supervisory statement which highlights the aspects of good governance to which the regulator attaches particular importance. It is therefore important for Credit Unions to carefully consider the contents of this consultation paper as it highlights what the regulator is focusing upon. If approved, the paper would apply to all PRA regulated entities including Credit Unions.
Some of the key points within the paper include:
- Risk Appetites– The PRA expect the strategy of the Credit Union to be supported by clear and measurable risk appetite statements. The risk appetite statements should be key to this strategy and should be used by the Board to monitor and control the risks and to make business decisions. Over the last year we have seen a growing number of requests from the regulator to see Credit Union’s risk appetite statements. We have assisted a number of Credit Unions to develop their statements.
- Setting the Strategy– The PRA state that the Board should be setting and documenting a prudent strategy and managing the Credit Union within its risk appetites and regulatory obligations.
- Culture– The PRA expects the Board to articulate and maintain a culture of risk awareness and ethical behavior for the entire Credit Union. It can be difficult to show that this culture is in place and Credit Unions may need to issue statements from the Board on expected conduct and carry out further staff training to demonstrate this.
- Board Composition– Much of the paper is written from the perspective of commercial organisations and focuses on the split of executive and non-executive directors. It states that there should be sufficient current and relevant knowledge and experience on the Board to understand the key activities and risks involved in the organisation and to be able to provide a challenge to management.
- Succession Planning– The PRA expect entities to have robust succession plans in place which covers unexpected loss of key individuals.
- Management Information– The PRA have used this statement to emphasise the importance of providing the Board with quality, accurate and timely management information in order to allow the Board to govern the business properly.
- Risk Committee– The PRA state that where there is a risk committee, the chair of the committee will be deemed responsible for safeguarding the independence and overseeing the performance of the risk function.
The full Corporate Governance consultation paper can be accessed by clicking here.