Regulatory Framework: to ensure corporate governance:

May 29th, 2015
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The depositors, particularly retail depositors, cannot effectively protect themselves as they do not have adequate information, nor are they in a position to coordinate with each other. It is believed that there could be a contagion effect resulting from the instability of one bank, which would affect a class of banks or even the entire financial system and the economy.

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Corporate Governance in Banks and Financial InstitutionsCorporate Governance is the system of internal controls and procedures used to define and protect the rights and responsibilities of various stakeholders. In recent, with the increase of failure of large corporations due to poor corporate governance the issue comes to front and many organisations pronounce the guidelines those are intended to protect the rights of various stakeholders and reduce the conflict of interests among them. Banks and Financial Institutions (FIs) are "special" as they do not only accept and deploy large amount of uncollateralized public funds in fiduciary capacity, but also leverage such funds through credit creation. The depositors, particularly retail depositors, cannot effectively protect themselves as they do not have adequate information, nor are they in a position to coordinate with each other. It is believed that there could be a contagion effect resulting from the instability of one bank, which would affect a class of banks or even the entire financial system and the economy. As one bank becomes unstable, there may be a heightened perception of risk among depositors for the entire class of such banks, resulting in a run on the deposits and putting the entire financial system in jeopardy. The crisis of an individual bank may cause to create problem for entire financial system as well as the monetary management of the country. So, there should have clear and defined duties and responsi

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