KUALA LUMPUR (REUTERS) - Malaysia's central bank tightened corporate governance standards on Wednesday, giving more power to boards of financial institutions.
The changes include a requirement for boards to have a majority of independent directors, and to approve and maintain credible recovery and resolution plans under conditions of stress.
"The revised standards strengthen the conditions for strong and effective boards, with greater emphasis on a sound risk culture and remuneration system in promoting prudent risk-taking," Bank Negara Malaysia said in a statement. "The standards address issues arising from more complex organisational structures and business models of financial institutions that have expanded in size and across borders."
Bank Negara has also asked financial institutions to adopt a code of ethics backed by a transparent whistleblowing policy, expand requirements on remuneration arrangements and stiffen expectations for effective governance.
The changes follow civil lawsuits by the US Justice Department last month alleging that more than US$3.5 billion (S$4.6 billion) was stolen from state fund 1Malaysia Development Berhad (1MDB), founded by Malaysian Prime Minister Najib Razak and whose advisory board he chaired until recently.