| 23 Jun 2009 |
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UAE central bank draft law to boost transparency
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Tuesday, Jun 23, 2009
Gulf News
Abu Dhabi: A new draft law by the UAE Central BankUAE Central Bank
stipulating that a director on the board of a bank cannot sit on the board of another bank as director, will help boost transparency in the banking and financial sectors, analysts say.
"These guidelines will enhance the quality of directors' leadership and significantly improve their board processes.
"Such improvements will be value-adding and will reinforce the international competitiveness of UAE banks," UAE Central BankUAE Central Bank
Governor Sultan Bin Nasser Al SuwaidiSultan Bin Nasser Al Suwaidi wrote in a foreword to the guidelines available on the Central Bank's website."Banks with good governance and are transparent in their disclosure practices are trusted by their stakeholders: Shareholders, customers, employees and by their regulators," Al Suwaidi said, adding that good governance is essential to a bank's long-term success.
"If a bank fails, it affects the whole economy, so dir-ectors are the guardians of financial stability," Al Suwaidi said.
Al Suwaidi said issues UAE banks and their dir-ectors need to pay more attention to include improving banks' disclosure standards and increasing transparency and the importance of managing conflicts of interest.
He added that there's a need to establish board committees to handle audit, remuneration and nomination matters, and to ensure there are credit and risk committees in place.
"Banks in the UAE already accept the need to make improvements on these lines and a number of banks have begun the journey," Al Suwaidi said.
Economists welcomed the Central Bank move.
"It seems to me, the purpose of limiting a director to sit on the board of only one bank, and not allowing him to sit on multiple boards, is to prevent conflicts of interest.
"A dedicated director can focus more on individual banks," Giyas Gokkent, chief economist at National Bank of Abu Dhabi told Gulf News.
"This is also probably more acceptable from an international best practice point of view," he added.
Mohammad Amerah, an Abu Dhabi-based economist, said the banks should compete freely in a free market economy.
He added: "A director on the board of more than one bank will have access to classified information on rival banks. How can a director be loyal to one bank when he's also on the board of another bank and the banks are competing with each other?"
By Himendra Mohan Kumar, Staff Reporter
© Gulf News 2009. All rights reserved.
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