The Bank of Russia publishes Guidelines for board of directors of financial organisations

The document prepared by the regulator seeks to instil professional, bona fide and reasonable approach towards financial institution management among the members of the board of directors at banks and non-bank financial institutions.

The Guidelines formulate the main aspects underlying the creation and operation of the board of directors of a financial institution, which must be clear to each member of the board. The document also sums up key principles governing the functions and obligations carried out by members of the board of directors and sets forth recommendations on the proper execution thereof. Additionally, members of the board of directors are offered a list of questions enabling them to carry out a self-assessment of the degree of their participation in the key functions of the board of directors and the extent to which they employ good business practice and a rational approach while performing official duties.

However, the document does not set strict rules for everybody. On the contrary, it recommends approaches to be used by directors depending on the nature and scale of their business, strategic goals of the financial institution, its risk profile, and other factors.

‘The board of directors is a key component of corporate governance. It determines strategic areas of activity for a financial institution and serves as a kind of guarantor balancing the interests of the management, owners, creditors (this is essential for financial institutions) and other stakeholders’, notes Elena Kuritsyna, Director of the Corporate Affairs Department. ‘Members of the board of directors of a financial institution should ensure the reliability and stability of its operation, its sustainable and long-term development, well-balanced decision-making by the management, and engage in timely risk identification, including the assessment of the potential outcome of risk materialisation’.

The Bank of Russia believes that, once applied, the principles for the work of members of the board of directors as set forth in the Guidelines will increase financial institutions’ management efficiency, competitiveness, and their integrity and reliability. All this will eventually bolster the overall stability of the financial market.