Importance of the Corporate Governance

Banking is a special kind of industry. No industry as highly leveraged as the banking industry. Banking industry play with the public’s money. Banking is the back bone of any economy and any problem in banking industry can impact the economy as a whole.

Growth of the banking is important for the growth of the economy. Thus it is imperative that the banks maintain the good governance all the times. Followings are the importance of the good governance;

Win public confidence: Any bank that follows good corporate governance practices is likely to win public confidence. This is particularly true in case of banks and financial institutions.

Easier access to capital: Banks having good corporate governance will find easier access to capital because of the fact that the public have greater faith in those companies as they believe that those companies will protect their interest.

Lower the cost of fund: Banks having good corporate governance will be able to raise the deposit at lower interest rates which will ultimately lower the cost of the fund.

Attract strategic and foreign investors : Banks with good corporate governance will be able to attract good strategic and foreign partners and the partner would have greater faith on the bank that they would make the best use of their investment.

Higher valuation of company’s assets and shares: Banks with good corporate governance will find that their assets are valued highly and their shares are traded at higher prices.

Reduces the chance of corporate failure: If banks follow good governance, then the chances of corporate failure will be very low.