##ance by regulators. ” the rosc - cg assessment further notes that “ the sbp has also been instrumental in improving corporate governance in the banking system, by requiring banks and dfis to adopt the code, and by assessing compliance with other relevant aspects of prudential regulation specifically applicable to banks / dfis. ” similarly the world bank ’ s 2007 report on doing business in south asia recognizes that “ pakistan provides relatively strong protections for minority shareholders against the misuse of corporate assets ”. it ranks 19th worldwide on protecting investors. outstanding corporate governance reform agenda while considerable progress has been achieved in enhancing corporate governance practices of banks, sbp is geared towards filling in the remaining gaps. in this regard, foremost is the need to develop a suitable cadre of professional directors who are knowledgeable of banks ’ affairs as well as independent of their management and majority shareholders. allied to this is the need to clarify and strengthen directors ’ fiduciary duties to act in the interests of the bank and all of its stakeholders. it is also essential for banks to provide sufficient time and information to directors to prepare for board meetings, structure board meetings so as to allow ample time for discussion and establish appropriate criteria for assessing and improving performance of directors, including independent directors. to raise awareness on these and related aspects, sbp is working towards issuing comprehensive corporate governance guidelines for banks. as earlier discussed, pakistan ’ s corporate and financial sectors present corporate governance issues peculiar to complex ownership and group structures. by conducting operations through a complex network of subsidiaries, controlling shareholders often acquire control of operations and / or cash flows disproportionate to their equity stake in individual companies. the key issues that arise as a result include : ( i ) inequitable treatment of stakeholders ; ( ii ) dominance of controlling shareholder - directors over board proceedings ; ( iii ) lack of independence of the board from the management ; and ( iv ) channeling of bank resources to the benefit of group concerns. in order to address such corporate governance issues, there is a need for group supervision by the regulators. as regard the banking supervision, sbp is working towards introduction of consolidated supervision whereby it will not be monitoring banks as a stand - alone entity but rather as part of the entire banking group. this will help to evaluate the strength of the entire group and to mitigate risks arising from group companies. a significant component of consolidated supervision will be review of group structures and detailed examination of related party transactions. i would also like to

of the institutions on an ongoing basis. similarly, the misaligned incentives and the remuneration of directors and executives of banks and financial institutions also came under scrutiny in the post - crisis reforms. this led to growing efforts for rationalization of compensation practices in the financial sector, with a focus on medium to longer term goals to avoid undue risk - taking and promoting transparency and meeting proper disclosure requirements. though corporate governance is important for every institution and business, i consider it more critical for the banks as they are the custodians of household and business sector deposits and their intermediary role is only possible when the society has full confidence in its banking system. and, this is where the role of the central bank and other regulators of the financial system comes in. the corporate governance revolves around three basic principles of fairness, transparency and accountability. sbp has been on the forefront in promoting sound corporate governance practices and fair competition in the banking sector by introducing various reforms and prudential regulations. the sbp has implemented a comprehensive corporate governance regime for the banks, which is supported by a robust legal and regulatory framework, riskbased supervision and detailed banking sector reforms, notably, privatization, liberalization and consolidation of banks. the measures taken by sbp have enabled the corporate governance regime for banks and its different elements are not only compatible with international best principles but are also parallel with most other emerging economies. central banks are vital in instilling confidence in the economy. they are key towards the promotion of trust and confidence in the financial sector. interested groups on the other hand may attempt to disrupt the regulatory framework and in turn confidence in the institution. accordingly, we must provide constant reassurance to the public of the confidence in the central bank. cognizant of the international regulatory developments, the sbp regularly reviews the international regulatory standards and best practices issued by the financial stability board ( fsb ), bank for international settlements ( bis ) and other multilateral agencies and standard setting bodies and assesses them for their possible implementation in its banking system. the sbp ’ s regulatory approach towards promoting and strengthening of corporate governance has been successful in inducing a positive change in the corporate governance bis central bankers ’ speeches culture in the banking sector that has transformed them into healthy and profitable financial institutions. it also positively impacted the solvency profile of the banking system, that has enhanced their market value and attracted substantial foreign investment in the banking sector during the 2004 – 2009 period. i am pleased to state