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The FSB has recently published the findings of its Thematic Review on Corporate Governance. The review takes stock of how FSB member jurisdictions have applied the G20/OECD Principles of Corporate Governance (“the Principles”) to publicly listed regulated financial institutions. The report aims to highlight examples of effective governance practices and areas where good progress has been made in implementing the Principles while noting gaps and areas where follow up work is needed.

The review identifies many examples of how jurisdictions have applied the Principles and emphasises that important lessons have been learned by financial institutions, regulators and other stakeholders; foremost among these is the need to strengthen corporate governance.

It also makes 12 recommendations grouped into the areas of focus of the reviewi. Some of these recommendations are directed primarily at financial institutions themselves, others at FSB member jurisdictions, and one broad, final recommendation is made for the OECD to review practices in respect of certain areas of corporate governance.

Recommendations for financial institutions include:

  • Implement and disclose codes of ethics and/or conduct as part of the institution’s approach to applying the high ethical standards required. Codes of conduct and codes of ethics may be useful to set the framework for judgement decisions and to demonstrate the institution’s commitment to ethical behaviour to stakeholders. Disclosure on implementation and compliance with these codes will increase transparency.
  • Conduct regular assessments of board effectiveness and ensure the board receives adequate training to remain abreast of relevant new laws and regulations. 
  • Improve succession planning and board training procedures and practices. 
  • Enhance the transparency of the board nominations process, for example, the criteria for nominating individuals to the board, the qualifications of board members and the election process.
  • Give shareholders the opportunity to vote on remuneration policies and the total value of compensation arrangements offered to the board and senior managementii.

Further observations and suggestions that the review made include:

Group oversight and the relationship between group entities is an area that is worthy of further consideration.

  • This includes issues such as lines of sight covering effective intra-group oversight, reporting and escalation, and identifying related party transactions (RPTs) and setting materiality thresholds for board review.
  • Clearer, more prescriptive requirements in respect of requirements around oversight of control functions (e.g. Risk Management and Internal Audit) at subsidiary level, as well as at the listed parent of a financial services group, to help provide “a sounder case” in the event of non-compliance.
  • The UK and Australia are the only two jurisdictions that have a “shadow director” concept under corporate law, but 10 others have extended the concept of director to achieve the same goal. An example of how liability is properly established within company groups is the explicit inclusion of group managers within the UK’s Senior Managers Regime (“SMR”).

Conflicts of interest (COIs), including related party transactions, is an area that warrants further investigation.

  • There are number of key challenges around the review and disclosure of RPTs, including identifying RPTs and setting materiality of RPTs that require review by the board.
  • Disclosure requirements for RPTs vary significantly. Some jurisdictions specify exclusions to the requirement for the board to approve RPTs (e.g. those in the ordinary course of business) which gives rise to the risk that the requirements can be circumvented; in other jurisdictions there are no materiality thresholds which could lead to boards spending a disproportionate amount of time/focus on approving many small RPTs.
  • In many countries a provision for final approval by shareholders is made for particularly material RPTs or where the board can’t reach a decision. This can be expensive/less efficient but may have positive impact on boards’ management of COIs and the exposure of insider dealing.
  • Very few jurisdictions specifically reference the importance of independence as it relates to COIs or refers to board members’ responsibility in this area (although most do have requirements around detecting and preventing COIs).

Business and risk culture, and setting the “tone from the top” warrant further attention. 

The “tone from the top” strongly influences governance and decision-making throughout the financial institution.

Board evaluations are an effective tool and required across almost all jurisdictions but the quality of evaluations and access to results could be further enhanced.

  • More detailed guidance to financial institutions, especially on minimum risk management requirements and remuneration practices, could enhance the quality of board evaluations.
  • The results of all assessments of a board’s effectiveness are not typically made public or shared with shareholders (for example, those undertaken by supervisors). Shareholders may benefit from access to this information, which may bring to light less significant but still important weakness that they may not otherwise be made aware of.
  • Other stakeholders’ (besides the board’s own and supervisors) assessment of board effectiveness/the governance framework is broadly non-existent.

Succession planning requirements could be enhanced.

  • Many jurisdictions do not require or encourage boards to oversee the succession planning process, as called for in the Principles.
  • Financial institutions should consider enhancing their training programmes for directors, both at the time a director is appointed and on an ongoing basis, and the disclosure thereof.
  • National authorities and/or firms should consider:
    1. incorporating the suggested role of major shareholders in the process and details of how the succession plan relates to the strategy of the firm; and,
    2. providing standard disclosure requirements in relation to succession planning.

The disclosure and transparency of the board nominations process could be enhanced.

  • In Japan it is good practice to disclose details of the board nominations process ahead of the general meeting in which board members are elected.
  • Stakeholder Relationship Committees are a requirement in Hong Kong and India, along with similar transparency measures to Japan.

Typical external auditor reporting lines have a negative impact on auditor disclosures to shareholders.

  • External auditors are appointed by shareholders and should report to shareholders.
  • Reporting lines/oversight of the external auditor are typically to/carried out by the Board and Audit Committee. This has a negative impact on the quality of disclosures to shareholders which are often formulaic and less informative as a result.

This links in with a recurring theme in the FSB’s observations: the importance of giving shareholders and other stakeholders access to relevant and timely information.

Further recommendations that the review makes, primarily for FSB member jurisdictions and the OECD to address include:

FSB member jurisdictions:

  • Ensure an effective corporate governance framework is in place by : eliminating gaps or inconsistencies between the various sources of corporate governance requirements/standards; considering the additional criteria that are highlighted in the Principles (beyond size, complexity and nature of business) to implement corporate governance requirements in a proportional manner (such as ownership structure, geographical presence etc.); and, augmenting enforcement powers, as appropriate, to address weaknesses in corporate governance.
  • Improve/enhance disclosure and transparency around governance arrangements and remuneration information in FSB member state jurisdictions.
  • Enhance the effectiveness of whistle-blower programmes, including policies that protect whistle-blowers.


Consider reviewing current practices around:

  • Effectiveness of rules relating to boards within group structures (e.g. the rules relating to the duties, responsibilities and composition of subsidiary boards).
  • Related party transactions framework (identifying, approving and disclosing). The FSB have identified that disclosure requirements for RPTs vary significantly and that the review and approval RPTs is a serious issue in several jurisdictions that warrants further investigation.
  • Shareholder votes on pay¸ as some jurisdictions do not currently require the principle of shareholder “say on pay” (i.e. that shareholders are informed of and have an opportunity to express their views on, e.g. through binding or advisory votes, the remuneration policy, value of remuneration and how remuneration is linked to performance).
  • Disclosure of beneficial ownership. Most but not all jurisdictions require disclosures, and disclosure of voting arrangements was an issue raised in discussions with the private sector. This is an area, along with cross shareholdings, where disclosure practices could be improved.
  • Role and responsibilities of independent directors on the board and board committees. Board and committee composition requirements in respect of independent directors vary across jurisdictions. In a few jurisdictions requirements on board composition differ across the various financial sectors. Some jurisdictions require other committees, such as Stakeholder Relationship Committee and Corporate Governance Committee.


We have a multidisciplinary team of specialists working together to provide support to financial services firms on corporate governance, including experts in governance, regulation, risk culture, human capital and succession planning.

We have significant experience in delivering board evaluations, enhancing governance processes and governance transformation programmes and on advising boards on the implementation of the Senior Managers Regime for banks and insurers. For further information and to find out more about how Deloitte can support your firm, speak to one of our experts.


Bianca Quarticelli – Senior Manager, Governance in Financial Services

Bianca is a Senior Manager specialising in governance advisory work within Deloitte’s Financial Services Risk Advisory Practice in London. She has significant experience in providing governance, regulatory and internal audit services to banks, insurers and other financial institutions.



Natasha de Soysa - Partner, Governance in Financial Services

Natasha leads Deloitte’s Financial Service Governance practice in the UK and across EMEA. She brings insight into the practical challenges associated with developing, implementing and reviewing governance frameworks. Natasha has worked with a number of FTSE 100 banks and insurers, as well as global financial institutions headquartered overseas on structural reform-related development of governance frameworks, board evaluations and internal audits of governance. Over the last 18 months Natasha has worked with many firms to implement the Senior Managers Regime and Senior Insurance Managers Regime.



Suchitra  Nair - Director, Audit and Risk Advisory in United Kingdom

Suchitra leads on Brexit eminence. She is part of the Central Deloitte UK expert group and sits on a number of internal and external Brexit forums. Suchitra’s other area of focus is fintech and regulation.



i“Ensuring the basis for an effective Corporate Governance framework”, “Disclosure and Transparency”, “The Responsibilities of the Board”, “the Rights and equitable treatment of shareholders and key ownership functions” and “the role of stakeholders in corporate governance” (Chapters I, V, VI, II and IV of the Principles).
iiAlthough UK companies must put the remuneration policy to a binding vote at least every 3 years, requirements on the way shareholders express views on remuneration policy vary widely across FSB member jurisdictions and a number of jurisdictions don’t require a shareholder vote.


  • thank you for sharing.

    Posted by: maryjane on 09/06/2017

  • Informative


    Posted by: Daniel Shikuku on 02/07/2017

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