Corporate Governance of Banks in Developing Economies: Concepts and Issues

This paper discusses the corporate governance of banking institutions in developing economies. This is an important issue given the essential role banks play in the financial systems of developing economies and the widespread banking reforms that these economies have implemented. Based on a theoretical discussion of the corporate governance of banks, we suggest that banking reforms can only be fully implemented once a prudential regulatory system is in place. An integral part of banking reforms in developing economies is the privatisation of banks. We suggest that corporate governance reforms may be a prerequisite for the successful divestiture of government ownership. Furthermore, we also suggest that the increased competition resulting from the entrance of foreign banks may improve the corporate governance of developing-economy banks.