Another important issue covered by the 2011–12 Bank Regulation and Supervision Survey pertains to the definition and the limits on related party exposures. About 95 percent of respondents state that their countries include as “related parties” significant controlling shareholders and board of directors along with the relatives and business interests of these two parties. In general, EMDEs have slightly stricter regulations and guidelines governing related parties. Note that what appears to be a drop in the median of the limit of related party exposure as a percentage of a bank's regulatory capital from 100 percent in 2005 to 25 percent in 2010 is in large part driven by differences in the sample of countries that responded to both surveys. If we focus on the “matched” sample, this change disappears.

**Table A6. Bank Governance:** **<u>Selected Responses</u>**

||**ALL**|**ADV**|**EMDEs**|
|---|---|---|---|
|**A. Authority Over Appointments**|**% Yes**|**% Yes**|**% Yes**|
|Does the supervisor exercise approval authority with respect to the appointment of<br>Board directors?|85|91|83|
|Does the supervisor exercise approval authority with respect to the appointment of<br>Senior bank management?|79|80|78|
|**B.**<br>**Remuneration or Compensation**|**% Yes**|**% Yes**|**% Yes**|
|Is the remuneration or compensation of Board directors evaluated as part of the<br>supervisory process to ensure that theydo not lead to excessive risk-taking?|59|74|53|
|Is the remuneration or compensation of Senior bank management evaluated as part<br>of the supervisory process to ensure that theydo not lead to excessive risk-taking?|59|78|52|
|Is the remuneration or compensation of Other bank staff (e.g. traders) evaluated as<br>part of the supervisory process to ensure that they do not lead to excessive risk-<br>taking?|53|75|45|
|Does the supervisory agency have the authority to take regulatory action when it<br>considers that the remuneration or compensation is excessive?|74|89|68|
|**C. Related Parties**|**% Yes**|**% Yes**|**% Yes**|
|Does the regulatory definition of related parties include Significant/controlling<br>shareholders?|95|94|96|
|Does the regulatory definition of related parties include Board directors?|97|94|98|
|Does the regulatory definition of related parties include Relatives of<br>significant/controllingshareholders and board directors?|94|94|94|
|Does the regulatory definition of related parties include Business interests of<br>significant/controllingshareholders, board directors, and their relatives?|94|89|96|
|Is there a regulatory limit on related party exposures?|95|86|99|
|**D. Some More Details ...**|**Median**|**Median**|**Median**|
|How many enforcement actions have you taken over the past 5 years (2006-2010)<br>based on a breach of anyof the above bankgovernance requirements?|0|0|0|
|What is the limit on related party exposure as a percentage of a bank's regulatory<br>capital(%)?|20<br>(100)|25<br>(100)|20<br>(100)|

Source: Calculations based on the 2011–12 Bank Regulation and Supervision Survey, which reflects values as of 2010. Values in parentheses refer to the 2007 Bank Regulation and Supervision Survey, which captures data as of 2005. ADV: advanced economies, EMDEs: emerging and developing economies (Table 1 provides the complete list of countries).

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