This principle states that banking supervisors must have in place requirements that banks lend to related companies and individuals on an arm’s length basis, that such extensions of credit are effectively monitored, and that other appropriate steps are taken to control or mitigate the risks.
Moreover, core principle 9 calls for prudential limits to restrict bank exposures to single borrowers or groups of related borrowers. If these principles are implemented on a global scale, they will raise a significant barrier against connected lending. 12. I now turn to a fourth set of causes of banking problems, that can be labelled inadequate corporate governance.