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Corporate Governance of Financial Groups

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  • Takahiro Yasui

    (OECD)

Abstract

Companies today, in particular banks, insurance companies and other financial institutions, increasingly operate their businesses in a group structure. These financial groups have a growing presence in markets worldwide and the economy as a whole. To do business effectively and efficiently in group structures, corporate groups should be managed in a holistic and integrated manner, in much the same way as an enterprise. Good governance of corporate groups should not therefore be very different from that of a corporation with many departments and branches. Nonetheless, the idiosyncratic risks that group structures bring about may require particular attention be paid to the governance of corporate groups. Such risks include the complexity of group structures and responsibilities among member companies in a multi-layered ownership structure across borders. The legal status of subsidiary companies, which is different from departments or branches of a corporation, should be respected. The governance of corporate groups needs to address inherent issues such as the dilemma of subsidiary boards’ loyalty to the interests of the subsidiary versus the broader interests of the group, and the risks associated with related party transactions. In the case of financial groups, particular consideration should be given to the interests of depositors and insurance policyholders of each financial subsidiary. Financial regulation increasingly establishes requirements for the governance responsibilities of the boards of financial subsidiaries, while emphasising the overall responsibility of the ultimate parents of financial groups.

Suggested Citation

  • Takahiro Yasui, 2016. "Corporate Governance of Financial Groups," OECD Corporate Governance Working Papers 20, OECD Publishing.
  • Handle: RePEc:oec:dafaae:20-en
    DOI: 10.1787/5jlv1m6zq3nx-en
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    File URL: https://doi.org/10.1787/5jlv1m6zq3nx-en
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    Cited by:

    1. Pierpaolo Marano & Michele Siri, 2018. "Cross-Border Insurance Groups: Towards a Comprehensive Supervision Under Solvency II," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 43(4), pages 594-614, October.

    More about this item

    Keywords

    corporate governance; corporate groups; financial groups; financial regulation; group structure;

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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