Author
Andrea Minto is a legal professional at the Regional Association of Cooperative Banks in Italy. He holds a PhD in Corporate and Banking Law for which his thesis title was "Internal control system and protection of the Cooperative Banks' specific regulation". His main research interests include: the recent economic crisis, commercial and banking law, and banking governance.
Executive Summary
The aim of this survey is to reason on the internal control system as something different from a mechanism conceived due to agency issues. The paper suggests an overview in which internal governance does not deal directly with the potential conflicts of interest between members and
managers, but arises from the entrepreneurial activity features, therefore valorizing how cooperative banks exercise their business. This argumentation is connected to the “organizational control” concept, referring to a peculiar competence of the management body: to enable the business to function, in fact, it is necessary to plan and fit out a series of procedures, rules and functions useful for the decision-making process, in order to give qualified support to the management body, in
particular with reference to its supervisory function. In doing so, the procedural organization of the activity aims to satisfy the “control instances” emerging from the business. In this sense, the internal control functions, such as compliance, risk management and internal auditing, represent the organizational arrangements preordained to support the corporate actors: because of the typical associated risks, only companies exercising a banking activity must “build” an internal structure to prevent and manage them. From this perspective, the aim is to interpret the imposition ex lege of the internal control system in credit institutions while in companies exercising other activities it is not binding: the banking activity needs a process system to identify, manage, monitor and report the risks to which it is or might be exposed.