Various Documents considered by the Committee - European Scrutiny Committee Contents

1 Financial services: corporate governance



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COM (10) 284

Green Paper: Corporate governance in financial institutions and remuneration policies

Legal base
DepartmentHM Treasury
Basis of considerationMinister's letter of 3 November 2010
Previous Committee ReportHC 428-i (2010-11), chapter 19 (8 September 2010)
To be discussed in CouncilNot known
Committee's assessmentPolitically important
Committee's decisionFor debate in European Committee B


1.1 In June 2010 the Commission published this Green Paper, the purpose of which was to identify and propose possible solutions to the failures of corporate governance that contributed to the financial crisis. It was accompanied by a staff working document: Corporate governance in financial institutions: Lessons to be drawn from the current financial crisis, best practices. The Commission analysed the contribution of failures in the areas of management of conflicts of interest, board composition, role and functioning, oversight of risk management and remuneration, shareholder control, the role of supervisory authorities and auditing. The Commission put forward a number of proposals for consideration, discussed how these measures could address the failures of corporate governance identified and sought to generate a wider debate on these issues. It raised the question as to whether these issues are better dealt with at the EU or national level and of the costs and benefits of greater harmonisation in these areas.

1.2 When we considered the Green Paper, in September 2010, we heard the Government's view that:

  • governance shortcomings in parts of the banking sector contributed to the onset and severity of the financial crisis;
  • a co-ordinated response at the national, EU and international levels is desirable; and
  • it welcomed the Green Paper and would carefully consider the proposals and respond to them.

We decided that before considering the Green Paper further we wanted to see the Government's response to it. Meanwhile the document remained under scrutiny.[1]

The Minister's letter

1.3 The Financial Secretary to the Treasury (Mr Mark Hoban) now sends us the Government's response to the Green Paper.[2] He comments that:

  • the response puts forward practical and constructive proposals that build on the principles outlined in the Green Paper and on the recommendations of the Walker Review,[3] which has already assessed corporate governance practices in the UK financial services sector;
  • it advocates working closely with the Commission and other Member States to deliver a strong, principles-based, framework for financial sector corporate governance;
  • on 25 October 2010 the Department of Business, Innovation and Skills launched a call for evidence, 14 January 2011, on A Long Term Focus for Corporate Britain to consider whether there are failures in corporate governance and the markets; and
  • although not directly related, this touches on a number of issues covered in the Green Paper and looks at the problems of short-termism, investor engagement, directors' remuneration and the economic case for takeovers.


1.4 We are grateful to the Minister for the information he gives us. We now recommend the document for debate in European Committee B to allow Members to consider the suggestions floated in the Green Paper in the light of the Government's response to the Commission.

1   See headnote. Back

2   See  Back

3   See  Back

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