Apart from the responsibilities of organizational leadership and oversight of management activities, the Board is also responsible for approving loans of values beyond the authority delegated to the management. It is imperative that the approver of the credit approves it with the full understanding of the transaction and the associated risks. The Working Capital Loan Guidelines 2079 also requires the approvers to analyze, certify and keep in record that the projections are realistic. Therefore, it is always better if the board members are equipped with the required skills for approving loans.
The board plays a pivotal role in the effective governance of its bank. It is responsible for overseeing management, providing organizational leadership, and establishing core corporate values and is accountable to shareholders, regulators, and other stakeholders. The board should also play an active role in ensuring compliance, managing conflict of interests and communicating with shareholders and adhering to disclosure practices. Serious errors or omissions in the bank’s disclosure requirements may result in non-compliance of laws or regulations, which in turn could lead to significant regulatory penalties. The board and management should view enhanced compliance, transparency and disclosures as a means of building trust and public confidence that enhance the bank’s value. The knowledge of international best practices on these governance issues would help the board direct the bank toward at resilient and trustworthy institution.
