UK: the governance of banks - Government review announced

Today's Sunday Telegraph newspaper contains an article written by the Chancellor, Rt. Hon. Alistair Darling MP. The Chancellor uses the article to announce the launch of a review of bank governance:

The Financial Services Authority is already looking at how regulation can be tightened. And I will publish plans on how to improve the system of financial regulation later in the spring. But I think we need to go further. That is why I am now setting up a review which will examine how banks are managed. Bank boards have a duty to ask more searching questions of their executives – when times are good as well as when they turn bad. I expect the review to make recommendations about the effectiveness of risk-management by banks' boards, including how pay affects risk-taking. It will also look at how boards operate, at the balance of skills, the role of institutional investors and whether our approach is consistent with international best practice".

Further information about the review is expected to be provided tomorrow. Update (9 Feb 2008): HM Treasury has announced the terms of reference for the review, which will be led by Sir David Walker - see here.