Karachi, May 29, 2006— The International
Finance Corporation, the private sector arm of the World Bank, partnered
today with the State Bank of Pakistan and the Pakistan Institute of Corporate
Governance in conducting a conference on bank corporate governance reforms
in Pakistan. The event was attended by senior representatives from
Pakistan’s banking sector, who discussed best practices and how to move
the reform agenda forward.
The conference gathered high-level decision-makers
in the area of bank corporate governance, including central bank representatives,
directors of leading banks, heads of banking associations and other key
stakeholders. The main objective was to provide guidance on how to develop
and implement a national reform agenda for sound bank corporate governance.
“The event aimed to stimulate a nationwide dialogue on corporate governance
among the participants, and to share experiences and lessons learned. This
offers an opportunity to develop a common approach on how to introduce
as well as implement bank corporate governance reforms in the country,”
commented Sebastian Molineus, IFC’s Corporate Governance Program Manager
for the Middle East and North Africa region.
According to Kaiser Naseem, Manager of the Pakistan Corporate Governance
Project at IFC, “Banks play a crucial role in Pakistan’s economic development,
as they provide financing to enterprises. However, by the nature of the
business, banking carries inherent risks, which can cause a major crisis.
Hence it is critically important that banks adhere to strong corporate
“The conference aspired to create increased understanding of the need
for good governance among Pakistan’s banking sector. The issue becomes
even more important in light of the recent revision of key corporate governance
guidelines and best practices by the Organization of Economic Cooperation
and Development and the Basel Committee. Moreover, in recent years the
Securities and Exchange Commission of Pakistan and the State Bank of Pakistan
have taken major reform initiatives in this field,” noted the Governor
of Pakistan’s State Bank, Shamshad Akhtar, in her keynote address.
What is corporate governance, and why is it so important?
Corporate governance refers to the structures and processes for the direction
and control of corporations. Corporate governance specifies the distribution
of rights and responsibilities among the main participants in a corporation—including
shareholders, directors and managers—and spells out the rules and procedures
for making decisions on corporate affairs. A company committed to
good corporate governance has well-defined shareholder rights, a solid
control environment, high levels of transparency and disclosure, and an
empowered board of directors.
Corporate governance is critical for
banks and other companies as it improves access to capital, attracts premium
valuations, and offers financing on better terms. Corporate governance
also improves performance. It results in better leadership, oversight,
work processes, compliance, and accountability, while reducing conflict.
Corporate governance can also make (or break) reputations, by creating
confidence, establishing goodwill, and building or restoring trust in the
Investors care about corporate governance,
as well-governed companies tend to outperform their peers, safeguard and
provide for higher returns on investment, protect shareholder rights, and
provide assurance that management acts in the best interest of the company
and all shareholders. Governments also care about corporate governance
because it develops the public and private capital markets, reduces vulnerability
to financial crises, and improves a country’s ability to mobilize, properly
allocate, and monitor investments. All of these benefits foster economic
The State Bank of Pakistan began operating
in 1948. Its mission is to promote monetary and financial stability and
foster a sound and dynamic financial system, so as to achieve sustained
and equitable economic growth and prosperity in Pakistan. For more
information, visit http://www.sbp.org.pk.
The International Finance Corporation
is the private sector arm of the World Bank Group and is headquartered
in Washington, D.C. IFC coordinates its activities with the other
institutions of the World Bank Group but is legally and financially independent.
Its 178 member countries provide its share capital and collectively
determine its policies.
The mission of IFC is to promote sustainable
private sector investment in developing and transition countries, helping
to reduce poverty and improve people’s lives. IFC finances private sector
investments in the developing world, mobilizes capital in the international
financial markets, helps clients improve social and environmental sustainability,
and provides technical assistance and advice to governments and businesses.
From its founding in 1956 through FY05, IFC has committed more than $49
billion of its own funds and arranged $24 billion in syndications for 3,319
companies in 140 developing countries. IFC’s worldwide committed portfolio
as of FY05 was $19.3 billion for its own account and $5.3 billion held
for participants in loan syndications.