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OECD Corporate Governance Working Papers

OECD Corporate Governance Working Papers provide timely analysis and information on national and international corporate governance issues and developments, including state ownership and privatisation policies. The working paper series is designed to make select studies by the OECD Corporate Governance Committee, OECD staff members and outside consultants available to a broad audience.

English

Corporate Governance of Financial Groups

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.

English

Keywords: corporate governance, financial groups, group structure, financial regulation, corporate groups
JEL: G38: Financial Economics / Corporate Finance and Governance / Corporate Finance and Governance: Government Policy and Regulation; G34: Financial Economics / Corporate Finance and Governance / Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance; G32: Financial Economics / Corporate Finance and Governance / Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill; G30: Financial Economics / Corporate Finance and Governance / Corporate Finance and Governance: General
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