Lot Of Improvement Needed In Compliance Culture Across Banks Says RBI Deputy Governor

Lot of improvement is needed in compliance culture across banks and well governed banks contribute to an efficient and cost-effective supervisory process, as there is less need for supervisory intervention, stated MK Jain, Deputy Governor, Reserve Bank of India noted in a speech yesterday at the Annual Global Banking Conference organised by IBA and FICCI. As a supervisor of banks, the Reserve Bank has keen interest in sound corporate governance and compliance culture, as it is an essential element in the safe and sound functioning of a bank and if not followed effectively may adversely affect the bank's risk profile. Such sound culture would help in building organisations that are strong, resilient, disciplined and enjoy the benefits of sustained growth and customer confidence. It will also pre-empt several supervisory actions, and attendant reputational risk, that would follow in case transgressions are detected.

Role of compliance has been gaining wider attention across the globe and it has been acknowledged by the central banks and bankers alike that compliance warrants considerable attention. Regulators, supervisors and international standard setters have become increasingly cognizant of the fact that merely enacting rules and regulations is a futile exercise unless these are complied with, both in letter and spirit, by the regulated entities. Sound corporate governance and compliance culture will permit the supervisor to place more reliance on the bank's internal processes. In this regard, supervisory experience underscores the importance of having appropriate levels of authority, responsibility, accountability, and checks and balances within each bank, including those of the board of directors, senior management and assurance functions by way of risk, compliance and internal audit.

He sounded hopeful that deliberations over the past two days on emerging trends in banking, changes in global regulatory landscape, the new bankruptcy regime in India and technological innovations affecting the way banks do business would prepare banks to not only cope up with the emerging challenges, but also help banks to use the opportunity provided by the new paradigm to further the agenda of inclusive and compliance oriented banking in the country.

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