Topic: BusinessCorporate Governance

Last updated: April 16, 2019

Assignment on CG and Social Responsibility on the topic Central Bank of Bhutan (Royal Monetary of Bhutan, RMA)Royal Monetary Authority of Bhutan (Central Bank of Bhutan) is my assignment topic for corporate governance e and social responsibility. RMA was established in 1982 with the enactment of RMA Act 1982 on 4th August by the 56th session of the National Assembly. Then RMA commenced operation s from 1st April 1983 by taking over the issue of the national currency, the management of the external reserves and foreign exchange operations.

In 1988, the Authority assumed the role of government banker, holding bulk of government deposits and providing finance through ways and means advance to the Government. With the passage of the Financial Institution Act of Bhutan 1992, the RMA Ac (1982) was amended to include licensure, regulation and supervision of financial institution of Bhutan.After Bhutan made the transition to a Democratic Constitutional Monarchy in 2008, the RMA Act 2010 passed by the Parliament in June 2010 replaced the RMA Act (1982). With the enactment of the RMA Act (2010), the status of the RMA has been elevated to that of an autonomous Central Bank with greater powers in terms of its mode of functioning and decision making process (RMA, 2017).

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The good corporate governance of RMA, Central Bank is defined by number of key-concepts or pillars, which together should form the basis of the legal framework governing a central bank. The key-concepts or pillars for central bank are as follows.Central bank independenceWhile central bank independence is still one of the most discussed institutional features of a central bank in economic and legal literature, it may be conclude that there is a large consensus basically accepting the need for the central bank independence. Indeed, in recent years an increasing number of countries have released their central banks into independence or strengthened the existing degree of independence.Central bank accountability The second pillar of central bank governance is democratic accountability.

As has been set out elsewhere, the need for mechanisms of democratic accountability derives both from the legal nature of a central bank and its position within a democratic system, as well as the task that a central bank usually fulfills with regard to monetary policy. It may be considered a common feature of all central banks, which do not form an integral part of the executive branch of government that they fall outside the classical three-branch system of government, and its system of checks and balances.Central bank transparencyIn the course of the discussion on democratic accountability, transparency has emerged as yet another key feature of the way in which central banks operate. Indeed, while the traditional view has been that at least some of the tasks assigned to central banks can best be achieved outside the limelight, in more recent times central bank have discovered transparency as an ally both in meeting demands of more openness and accountability and in communicating monetary policy. With the words of Posen it may be observed that central bank transparency has gone from highly controversial to motherhood and apple pie. Together with central bank independence and accountability, transparency forms the third pillar of central bank governance.

The Corporate Social Responsibility (CSR) that has taken by the RMA is to safeguard stability and protect consumers. This mandate is underpinned by the Bank’s vision of being trusted by the public, respected by our peers and providing a fulfilling workplace for our people.And also the central bank is committed to carrying out its statutory and administrative responsibilities in a way that delivers benefits for all stakeholders, including employees, the environment and the community around us.The central bank is committed to supporting the community, both at local and national level, through educational outreach programmes, charitable donations and staff volunteering, with a focus on education, employability and being a good nighbour.Once the CSR and CG decision is being implemented properly in an organization, the ultimate outcomes will come good for the public as well as for the employee. For the shareholder it will gain the confidence by reassuring them that the company is making smart business decisions and is well organized internally.

Therefore the confident shareholders are likely to invest larger amounts of money in an effectively governed company because a positive return on the investment is likely. This can lead to increased market confidence in the company, which serve to increase its overall stock value.There will also a business growth and development. As the value of a corporation increases, so does its ease in generating capital to make purchase aimed at sustaining growth.

CG can have positive effect on business growth by making it easier for a corporation to raise the necessary capital to acquire new territories or develop new products.The controversies that have gone through the central government (RMA) has thousand of homeowners wrongly pushed off tracker mortgages by their banks may still unaware that they are being overcharged, the central bank has warned. Also the controversies are misusing the power by the deputy governor, which at the end have to resign from the office. It is true that central banks provide public goods that minimizing costs is therefore not always the best solution. However, we should be aware that the pressure to at-tain efficiency is weak, as central banks are protected from competition.

Private enterprises that compete with each other are forced to be efficient and profitable in order to stay in business and satisfy their shareholders. Central banks generally lack such pressure. As a result, RMA need to work hard with these issues an invite external evaluation.

Cost-consciousness is especially important in cases where a central bank determines its own budget.The RMA, Central bank of Bhutan can reforms corporate governance and social responsibility like the other develop countries. It can copy like the Swiss country because they have the good CG and SR over. Current reviews funded by the World Bank are improving efficiency and linkages with departments to improve the process for starting a business. In other areas, Bhutan is facing increased pressure to step away from its sustainable development and environmental policies for the sake of growth. And to strengthen the social responsibility, it should also reform the Social responsibility like the other countries. The international financial community has adopted corporate and social responsibility as one the twelve core best practice standards.

For emerging market countries, improving corporate governance can serve a number of important public policy objectives.The key challenge will be ensuring the provisions provide an oversight for firm’s practices, but do not overreach into restricting the flexibility of the board to make commercial decision.The central bank of Bhutan (RMA) plays vital role to financial market in the country. If the central bank is not in the position the public will in great loss because the banks will charge the interest what every they want to charge. The RMA controls over the financial institution and looks after the economy of the country. For all the countries in the world, they need the central bank to control the financial and look after the economy of the country.

Bibliography BIBLIOGRAPHY RMA. (2017).


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