"Regulators are most concerned with financial stability. As their perception of risk taking by financial institutions rises, so will their demands for greater controls," said Dr. Nabil El-Hage.
Corporate governance expert and former professor at Harvard Business School, Dr. El-Hage was presenting at the 6th Corporate Governance (CG) workshop organised by the Waqf Fund. 23 CEOs and board members of Waqf Fund member institutions attended the session. He presented three cases of compliance failure, corporate fraud and tightening regulations due to Basel III. These included a global systemically important bank, an emerging market bank and a US-based family owned company. He highlighted the growing importance of regulatory compliance in the banking industry and the need for board members to be extra vigilant in this regard. 
The workshop concluded with the following thoughts: 
1. Bank boards have multiple constituents, and multiple lenses through which to view the world shareholders, customers, staff and the public, to name the most obvious ones. In times of crisis, regulators will focus on protecting the public, and financial stability will be paramount. 
2. Banks and their boards must consider three aspects of every decision they make – economic, legal and ethical. Regulators will hold them to the highest standards of each. 
3. There are always gaps between what goes on in the boardroom and the reality in the field. When the gap becomes a full-fledged "disconnect", boards can and will get in trouble.
4. Boards have a responsibility to gauge the extent to which their directives are being ignored, or worse, disregarded, in the field. This is more difficult in large organisations. 
5. Boards need to be on the constant look out for "Red Flags". When board members see such red flags, or when they "smell a rat", "niceties" need to take a back seat. Board members need to be relentless in seeking and getting answers to their questions. 
6. According to Warren Buffet the boards are 50% "Business Entities" and 50% "Social Clubs". When you see violations of senior management’s duties of candor, care or loyalty, the "Social Club" aspect of the board needs to take a back seat. 
7. Best corporate governance practices might be a necessary condition to make boards great, but it is certainly not sufficient. The key is not structural, it is social. Board members have to be comfortable with each other socially and develop a chemistry among themselves in order to function as a board effectively.
8. While banks are by no means expected to run the clients’ business, they really cannot afford to look the other way if they become aware of fraudulent activities.

Source: BNA