Andrew Bailey, deputy governor, prudential regulation and chief executive officer, PRA, has given a speech at the Westminster Business Forum on the role of governance and boards in the prudential supervision of deposit takers, insurance firms and major investment firms.

Mr Bailey outlined three of the PRA’s expectations of boards:

1. to exercise good judgement in overseeing the running of the firm and to do so on a forward-looking basis;
2. that judgement is improved by good constructive challenge from non-executive directors (NEDs) and
3. that a firm’s culture should promote discussion, debate and honest challenge; and
4. to allow supervisors such as the PRA to trust that NEDs, under the leadership of the chair, will challenge the executive in all aspects of the firm’s strategy.

In addition, Mr Bailey reiterated that he expects board members to have a certain understanding of complex financial issues, noting that it is the job of the executive to be able to explain in simple and transparent terms complex matters to NEDs.

A copy of the speech is available. http://bit.ly/1M1EVNa