The chancellor of the Exchequer, the secretary of state for business, enterprise and regulatory reform and the financial services secretary to the Treasury have announced a review to recommend measures to improve the corporate governance of UK banks, particularly with regard to risk management.

The review is being chaired by the former financial services regulator, Sir David Walker.

It will examine board management of risk (including the effectiveness of risk and audit committees), incentives to manage risk in bank remuneration policies, the competences needed on bank boards, board practices and structures, and the role played by institutional shareholders.

The review will give preliminary conclusions to commissioning ministers in the autumn and final recommendations by the end of the year.

The chancellor of the exchequer said: 'As part of our review of supervision of financial institutions it is clear that corporate governance should have been far more effective in holding bank executives to account. I have therefore asked Sir David to carry out a thorough review and to make recommendations for improving what should be the first line of defence.'

Business secretary Peter Mandelson said: 'The review is needed to ensure that we have competent, well-run and transparent boards, which are engaged with their shareholders, and capable of understanding and managing risk effectively. This will benefit savers, borrowers, and staff, as well as the public.'

Financial services secretary, Paul Myners, ex Land Securities chairman, said: 'Boards are effective only when held to account by vigorous and alert owners who devote the time and effort needed for engagement. This review is the first step in generating renewed commitment from institutional shareholders.'