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Europe Starts Financial Sector Governance Reform

Global Glimpses | June 7, 2010

The European Commission has launched a review of the corporate governance rules followed by financial firms in its 27 member states.

A wide-ranging Green Paper floats a series of potential governance reforms, including new duties for directors, better risk reporting, and a wider remit for external auditors.

The paper argues, “Although corporate governance did not directly cause the crisis, the lack of effective control mechanisms contributed significantly to excessive risk-taking on the part of financial institutions.”

In the run up to the crisis company boards “rarely comprehended either the nature or scale of the risks they were facing”, the paper argues.

The paper focuses on reforming governance for financial firms, but the Commission said it will soon launch a broader review of corporate governance within listed companies in general.

That wider review will...

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