11.3.1 Why is this a relevant characteristic?

A weak corporate governance framework may be one of the causes of the bank’s failure. For instance, the Commission noted that some of the Spanish banks “had several structural limitations, such as weak corporate governance systems which prevented those institutions from detecting problems at an early stage”.1 Consequently, restructuring plans should pay attention to corporate governance issues.2

The relevance of improving the corporate governance framework was already recognised in the 2004 R&R-guidelines. Point 37 of the R&R-guidelines required that “where the firm’s difficulties stem from flaws in its corporate governance system, appropriate adaptations will have to be introduced”. Furthermore, the Recapitalisation Communication provides that there should be “a thorough and far-reaching restructuring, including a change in management and corporate governance where appropriate”.3

The decisional practice of the Commission shows that the Commission recognises the importance of corporate governance.4 In many decisions, it welcomed measures aimed at improving the corporate governance. This can be illustrated by the following recital:

This recital thus underlines that the fact that the beneficiary bank committed to strengthen its corporate governance framework is a relevant characteristic.