The separation of ownership and management can create conflict of interest if there is a breach of trust by managers on account of intention, omission, negligence or incompetence. This can be taken care of by making boards more accountable to all stakeholders and making their functioning transparent. Over the years, we have tried to align our transparency and disclosure standards to global best practices. But we need to ask questions. Is the voice of independent directors always independent? Do bank CEOs countenance criticism from the board? Are boards succumbing to 'group think" and abandoning their responsibility for independent judgement? It is only through such soul searching that corporate governance of banks can improve its effectiveness.

The failure on the scale we saw during the recent global financial crisis is also reflective of poor ethical standards in banks. Almost all the complex gamut of causes of the crisis relate to how the financial system operated. The behaviour of actors across the chain of the financial sector was swayed by the opportunity for making quick profit rather than by fair, ethical and moral standards. Neither were the sub-prime borrowers adequately warned that there was a good chance of fall in asset prices nor did investment advisers tell their clients of the risk they were taking in buying MBAs and CDOs. Such behaviour was not only not checked, but was even encouraged.

Here at home, though our banking sector largely escaped the crisis, we should introspect on our own shortcomings and loose practices. To what extent have banks deviated from proper conduct in the sale of forex derivatives? Is there too much focus on the quarterly earnings cycle to the detriment of longer term performance? Are aggressive strategies leading to excessive risk taking? Issues such as these, I believe, underscore the special ethical dimension of the financial sector over and above that of other businesses. Boards of banks and financial institutions have to be conscious of their obligation not to hold the larger public interest hostage to their private profit motive.