The Georgia Department of Banking and Finance referenced a quote from former President John F. Kennedy to remind credit union and bank boards of their responsibilities.
The agency is running a series titled Board Governance: The Essential Roles of Governance and Oversight in its monthly bulletin. The Kennedy quote reads “Leadership and learning are indispensible to each other.” The Georgia DBF said the statement addresses “one of the essential elements of effective leadership: knowledge.”
“In the context of leading a financial institution, not only are its leaders expected to establish tone at the top of the organization for high ethical standards and embody commitment to the service of communities and membership, but board members must fulfill the essential role of establishing a safe and sound governance framework and providing active oversight to their bank or credit union,” the regulator said.
Beyond appointing the CEO, establishing strategic direction and policies, and developing compensation packages, the board “must have a basic understanding of what the bank or credit union does, what risks it faces, and how those risks are measured, monitored, and controlled.”
“As the financial services industry and financial products evolve and become increasingly complex, maintaining a basic understanding of the activities, products, and services offered by a bank or credit union requires ongoing training throughout a board member’s term of service,” the Georgia DBF offered.
To that end, new board members should undergo initial orientation training at the time that they are elected to the board, the agency reminded. Meanwhile, the NCUA is requiring federal credit union boards to be in compliance with financial literacy rules that include a working familiarity with basic finance and accounting practices.