Richard Westlake, business advisor based in New Zealand, said: "Too many bank directors have failed to understand or follow corporate governance rules.".— File Photo

HA NOI (Biz Hub) — The vital role played by managing directors at the nation's banks was highlighted during yesterday's meeting between the International Finance Corporation (IFC) and bank officials.

According to Simon Andrews, IFC's regional manager for Viet Nam, Laos, Cambodia and Thailand, Viet Nam has seen the impacts of improper corporate governance over the past four years.

Meanwhile, good governance would help companies, especially banks, earn steady sources of income, better access to capital and equity, and enhance long-term prosperity, he added.

Richard Westlake, business advisor based in New Zealand, said: "Too many bank directors have failed to understand or follow corporate governance rules."

What went wrong was that they understated banking risks. As banks were strongly connected to businesses and to one another, the failure of one bank could risk the loss of confidence in the entire system. Westlake stated the risks of liquidity and solvency, such as being unable to repay depositors on demand and declining quality of assets, worsen when banks become highly leveraged.

Therefore, a good director must have a strategic perspective, independent thoughts, and must understand the banking business, the New Zealand advisor added. He also advocated that the board of directors spend up to 30 per cent of their time addressing risks.

However, Westlake said Viet Nam was not the only country facing this issue. "So there are massive opportunities for the country to take the lead," he said, suggesting banks should start hiring the right people with the right skills, behaving in the right way. — VNS