LONDON, Nov 20 (Reuters) - Bank boards must have acollective understanding of how much capital the bank needs andthe way staff are paid rather than delegate all key decisions tocommittees, a Bank of England policymaker said on Thursday.
Board members were criticised for not fully grasping theirjob after the 2007-09 financial crisis highlighted majorgovernance failures.
Martin Taylor, a member of the BoE's Financial PolicyCommittee, said that in response to such failures in the pastand to operate more efficiently, boards have increasinglydelegated important decisions on risk, remuneration, audit andcapital allocation to committees.
"I believe this efficiency has been bought at a high pricein reduced board cohesion," Taylor told an Oliver Wymanconference in London.
"It has got harder - perhaps because some organisations areungovernably large - for boards to see any sort of big picture.Unable to encompass the blurred outlines of a sometimes uglyreality, individuals take refuge in trivial detail."
A board must have "collective understanding" of and takeresponsibility for models used by the bank to determine how muchcapital they hold, Taylor said.
Boards should also understand the incentives that underlieremuneration systems and understand all the different activitiesin which the lender is engaged in, he added.
The FPC has direct powers over banks and sets the tone forsupervision by the BoE's Prudential Regulation Authority arm. (Reporting by Huw Jones, editing by Steve Slater)