Following the financial crisis and the effects of the latest economic cycle, the OCC adopted risk governance guidelines in September 2014 with “heightened expectations” for risk management for banks with assets of $50 billion or more. In July 2015, the Basel Committee on Supervision released guidelines for corporate governance principles for banks with an emphasis on the importance of effective corporate governance for the safe and sound functioning of banks. It stresses the importance of risk governance as part of banks’ overall corporate governance framework and promotes the value of strong boards and board committees together with effective control functions.
While these guidelines apply to larger banks with over $50 billion in total assets, we anticipate these principles will spill over to regulatory expectations for community banks. Given the likelihood that these guidance principles will affect the regulatory evaluation of community banks, we believe it is good business practice to be aware of these regulatory guidelines and consider ways now to align board governance policies and practices with these heightened expectations where feasible. While we recognize the difficulty smaller banks have in complying with expectations for much larger organizations, there are some practical ways to incorporate these governance principles in community banks.
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