Corporate governance 'needed to prevent risk-taking'

Financial institutions should incorporate extensive corporate governance and risk-management safeguards to protect against potential failures.

This is the finding of a new report by the Organisation for Economic Co-operation and Development (OECD), which noted that contagion risk has been one of the ’main hallmarks’ of the current economic crisis.

It stated: ’In principle, sound corporate governance and a strong risk-management culture should enable banks to avoid excessive leverage and risk taking.’

Despite this, the body commented, banks continue to push the boundaries of their products ’beyond the sensible needs of industry’ in an effort to drive profits.

While this has led some organisations to experience a growth in revenues, it added, many seem to not have learned a lesson from the recent economic downturn.

A revision of the current system is necessary to prevent it being held ’hostage to the ’gung-ho’ few’, the OECD concluded.

In recent news, PricewaterhouseCoopers revealed that many banks expect business volumes to decrease in the first three months of 2010. ADNFCR-2318-ID-19558850-ADNFCR