1. Importance of internal governance

16. Trust in the reliability of the banking system is crucial for its proper functioning and a prerequisite if it is to contribute to the economy as a whole. Consequently, effective internal governance arrangements are fundamental if institutions, individually, and the banking system, are to operate well.

17. In recent years, internal governance issues have received the increasing attention of various international bodies [See in particular: BCBS 'Principles for enhancing corporate governance' of 4 October 2010 available at: http://www.bis.org/publ/bcbs176.htm; OECD 'Corporate governance and the financial crisis -Conclusions and emerging good practices to enhance implementation of the Principles' of February 2010 available at http://www.oecd.org/dataoecd/53/62/44679170.pdf; European Commission 'Green Paper on Corporate governance in financial institutions and remuneration policies' of June 2010, available at http://ec.europa.eu/internal_market/company/docs/modern/com2010_284_en.pdf.]. Their main effort has been to correct the institutions' weak or superficial internal governance practices as identified in the financial crisis. These faulty practices, while not a direct trigger for the financial crisis, were closely associated with it and so were a key contributory factor.