independent members of the management and supervisory bodies, in order to safeguard the interests of the various stakeholders suitably and preserve sound and prudent management, and ultimately, financial stability. banks must also fully comply with the rules relating to conflicts of interest ( which differ from the rules relating to formal independence ). as well as formal independence, “ independence of mind ” is also needed, a dimension that requires an absence of conflicts of interest, even potential conflicts. the management function within banks cannot supersede internal supervision. on the contrary. non - executive members of the management and supervisory bodies must be empowered to fully exercise their duties of diligence. they must scrutinise the day - to - day management, and respond to the interests of the banks ’ various internal and external stakeholders. the internal supervisory function must in turn be provided with the information required for the complete fulfilment of its duties. it should be proactive in obtaining such information, and should exercise effectively its duties of assessing the internal control system, which is essential to ensure the reliability of the information provided during the decision - making process. banks should possess an internal organisation based on a clear distribution of responsibilities between their various units and functions, as well as clear vertical and functional reporting lines. each employee must be fit for the duties they exercise, in accordance with a recruitment and training policy that conforms to the banks ’ specific needs. in particular, banks should identify and assess the holders of essential positions, that is, those who exercise duties that confer significant influence on the management or whose duties can have a material impact on their risk profile. the internal control mechanisms should have the empowerment, independence and capacity for intervention necessary to fulfil their objectives. the management and supervisory bodies should act in a way as to make clear the internal control functions contained in internal rules of procedure, and the assessment, career progression and compensation scheme of the staff employed in these areas must obey specific criteria, separated and distinct from the criteria followed for staff employed in commercial areas of the business. assessment and career progression policies and banks ’ remuneration policies and practices must line up with the interests of the members of the management and supervisory boards, as well as those of the employees in general as a goal of sound and prudent management. the banks must possess a conflicts of interest policy that enable such conflicts to be identified and eliminated. and rules have also been defined to seek to ensure that the statutory auditor 3 / 4 bis central bankers '

luis maximo dos santos : corporate governance - importance and limits address by mr luis maximo dos santos, vice - governor of the bank of portugal, at the conference " corporate governance - creating value for society ", organized by the portuguese institute of corporate governance ( ipcg ), lisbon, 25 october 2018. * * * 1. allow me to begin by thanking you for the invitation to take part in this magnificent conference alongside these distinguished the speakers and participants. i would like to congratulate the chairs of the board and general council, antonio gomes mota and pedro rebelo de sousa respectively, representing the portuguese institute of corporate governance ( ipcg ) on the occasion of its 15th anniversary, for the organisation of this timely event, and warmly greet all the members of its corporate bodies. the creation of this institute 15 years ago was a moment of inspiration, anticipating – at a time when the subject was still relatively unspoken – the importance that corporate governance would assume. portugal needs strong private associations which encourage discussion on subjects of importance to the development of enterprises and the quality of management in its broadest sense, which are able to generate critical mass on complex themes, as is the case of corporate governance. a special mention goes to the fulfilment this year of the objective to see approved a corporate governance code, long pursued by the ipcg, and which is a landmark in private regulation in portugal. 2. the theme of corporate governance has already been reflected upon at length, especially in the united states, where some authors traced the first uses of the term to the 1970s. in the united kingdom, the so - called 1992 cadbury report is considered pioneering. it was produced by a committee set up to assess – even then – the underlying causes behind a number of corporate failures. since then, attention given to the theme of corporate governance – which has a multidisciplinary nature, bringing together knowledge of economics, finance, accounting, law, management and organisational behaviour – has not stopped growing. this growing interest is no stranger to the succession of corporate scandals with wide - reaching public repercussions, even before the financial crisis, as was the case of barings bank ( 1995 ), enron ( 2002 ) and parmalat ( 2003 ) – to name some of the most notorious – which in some way motivated the production of a set of corporate governance best practices by international organisations of note such as the oecd, world bank and basel committee,