In the aftermath of the crisis and following several high profile control failures among banks, the governance and culture of financial institutions are being questioned in unprecedented ways. Supervisory processes under Basel’s Pillar 2 now include detailed and frequent reviews of the adequacy of bank governance arrangements at board, group and individual business/entity levels. Risk governance in particular has come under the microscope. Emerging best practice includes regular reviews of banking culture, of how people behave “when no one is looking”.
Nestor Advisors has a unique track record in analysing and advising on the corporate and risk governance of financial institutions (FIs). Our FI clients benefit from our systematic benchmarking of banking sector practices over a number of years. Our periodic governance surveys of the top European banks are widely referenced by regulators, academics and the financial press. Institutions such as the Basel Committee for Banking Supervision, the UK Parliament and the Walker review team, the Institute of International Finance (IIF), the EBRD and the World Bank/IFC have sought our advice and input. Among our clients are a number of banking supervisors, which allows us to have an in-depth perspective on supervisory expectations and evolving regulatory requirements in the banking sector.
We work with financial sector clients to develop policies, organisational structures and practices that allow boards to develop a fit-for-purpose risk appetite framework; to communicate and cascade risk appetite objectives and goals down the organisation; and to design management reporting on the institution’s risk profile. Our comparative research in financial sector risk governance has informed the terms of reference and reporting requirements of risk committees and functions in major European banks.
Our services to financial institutions include:
- Corporate governance assessments: Mindful of increasing supervisory requirements for a holistic and regular oversight of governance by the board of financial institutions, we have adopted purpose-built assessment methodologies that address all key functional and business areas at group and individual entity level. For more information on this service, please click here.
- Board evaluation: Our knowledge and long track record in the banking sector allows us to develop and maintain a template for board evaluations that addresses the special characteristics of bank boards and their committees: namely, a focus on risk; enhanced attention to suitability/fit and proper issues; and a systematic view of corporate and risk culture. For more information on this service, please click here.
- Risk governance review and services: We have assisted several board risk committees to develop their perspective on the quality of risk management through regular risk governance reviews; on developing or improving information templates that allow the committee to consistently follow the FI’s risk profile; on developing the risk appetite framework, policy and statement; and on building an approach to recovery and resolution issues. For more information on this service, please click here.
- Banking culture review: Boards are expected to closely follow the banking and risk culture of the institutions they lead, and drive cultural change when needed. To achieve this, they require a platform that will provide them with regular, reliable assessments of the institution’s culture. These assessments should be fairly comprehensive but also efficient in terms of management and board time and resources. Nestor Advisors has developed a fit-for-purpose assessment methodology encompassing seven key cultural areas and addressing both the perspective of boards and the requirements of their supervisors.
- Board and senior management development: Nestor Advisors, in cooperation with the International Institute of Finance, has developed a tailored programme for individual bank boards and senior management. This very successful one or two-day programme is aimed at enhancing directors’ regulatory, governance and risk management knowledge, adapted to the special circumstances of individual institutions. For more information on this service, please click here.
- Group and subsidiary governance services: Many of our clients are large banking groups whose boards must have a clear understanding of group governance across entities, businesses and geographies. Boards and leaders of subsidiaries need clarity on their responsibilities and accountability; and how these are related to the responsibilities of businesses or functional units at group level. Nestor Advisors has assisted several banking groups in the development of topical policies and systems to address these issues. We have also pioneered the development of an over-arching, high level governance policy for the whole group, the Group Governance Policy, which is now a supervisory requirement in many jurisdictions. For more information on this service, please click here.
- Control environment support: Our team has helped many banking clients develop, document and embed various policies, reporting structures and systems, processes and practices that constitute elements of a solid corporate governance and control edifice. These include board and committee terms of reference, policies, methodologies and procedures related to various areas of risk, templates for board information, codes of ethics and conduct. Nestor Advisors has developed ControlMirror®, a software system that maps and keeps current authority delegation and decision making within complex banking organisations. We also support clients in developing their corporate secretariat function by advising on practices and protocols and by providing training. For more information on this service, please click here.
- Governance research and benchmarking: Nestor Advisors has developed a governance data gathering and benchmarking platform of more than 350 data points and more than 30 synthetic governance indicators with time series depth of 6+ years. We are regularly benchmarking the governance of several clients using this platform. For more information on this service, please click here.
For more information on our services for financial institutions, please click here.