| |
|
 |
| For business information, annual reports, laws, ordinances, regulations and articles. |
|
|
|
020613
STATE BANK OF PAKISTAN BANKING SUPERVISION DEPARTMENT KARACHI.
BSD
Circular No.15
June 13, 2002
The Presidents/Chief Executives/Country Managers,
All Banks/DFIs
Dear Sirs/Madam,
PRUDENTIAL
REGULATION NO. XXIX –
RESPONSIBILITIES OF BOARD OF DIRECTORS
The State Bank attaches a great
importance to effective corporate governance, clear lines of responsibility, elaborate
mechanism of accountability, and existence of proper checks and balances in each
bank/financial institution. The corporate governance means the way in which business and
affairs of each institution is directed and managed by their ‘Board of
Directors’ and the ‘Management’. To promote safe and sound banking
practices, it is imperative that the ‘Board of Directors’ assumes its role
independent of the influence of the Management. Members of the Board should know their
responsibilities and powers in clear terms. Further, it should be ensured that the Board
of Directors focus on policy making and general direction, oversight and supervision of
the affairs and business of the bank/DFI and does not play any role in the day-to-day
operations, as that is the role of the ‘Management’.
2) In order to improve the prevailing corporate
governance and to make the Board of Directors of banks/DFIs more effective, the following
guidelines are being issued:
i) The
Board shall approve and monitor the objectives, strategies and overall business plans of
the institution and shall oversee that the affairs of the institution are carried out
prudently within the framework of existing laws and regulations and high business ethics.
ii) All
the members of the Board should undertake and fulfill their duties and responsibilities
keeping in view their legal obligations under all the applicable laws and regulations.
iii) The
Board shall clearly define the authorities and key responsibilities of both the Directors
and the Senior Management without delegating its policymaking powers to the Management and
shall ensure that the Management is in the hands of qualified personnel.
iv) The
Board shall approve and ensure implementation of policies, including but not limited to,
in areas of Internal Audit & Control, Compliance, Risk Management, Human Resources,
Credit, Write-offs, Recovery, Rescheduling/Restructuring of debt, Treasury Management,
Investments, Acquisition/Disposal of fixed assets, Donations/Charities, Prevention of
Frauds & Forgeries and any other operational area which the ‘Board’ and/or
the ‘Management’ may deem appropriate from time to time. The Board shall also be
responsible to review and update existing policies periodically and whenever circumstances
justify.
v) The
markets are ever-changing and so are their requirements. The Board, therefore, is required
to ensure existence of an effective ‘Management Information System’ to remain
fully informed of the activities, operating performance and financial condition of the
institution, the environment in which it operates, the various risks it is exposed to and
to evaluate performance of the Management at regular intervals.
vi) The Board should meet frequently (preferably on monthly
basis, but in any event, not less than once every quarter) and the individual directors of
an institution should attend at least half of the meetings held in a financial year. The
Board should ensure that it receives sufficient information from management on the agenda
items well in advance of each meeting to enable it to effectively participate in and
contribute to each meeting. The Board should carry out its responsibilities in such a way
that the external auditors and supervisors can see and form judgment on the quality of
Board’s work and its contributions through proper and detailed minutes of the
deliberations held and decisions taken during the Board meetings.
vii) To
share the load of activities, the Board may form specialized committees with well-defined
objectives, authorities and tenure. These committees, preferably comprising of
‘Non-Executive’ board members, shall oversee areas like audit,
risk management, recruitment, compensation, credit, etc without indulging in day-to-day
operations in these areas. These committees should apprise the full board of their
activities and achievements on regular basis.
viii) The
Board should ensure that it receives management letter from the external auditors without
delay. It should also be ensured that appropriate action is taken in consultation with the
Audit Committee of the Board to deal with control or other weaknesses identified in the
management letter. A copy of that letter should be submitted to the SBP so that it can
monitor follow-up actions.
3) The above guidelines are being issued under
the powers vested in the State Bank of Pakistan under the Banking Companies Ordinance,
1962 and are required to be followed by banks incorporated in Pakistan and DFIs. They will
also follow the ‘Code of Corporate Governance’ issued by the SECP so long as any
provision thereof does not conflict with any provision of the Banking Companies Ordinance,
1962, Prudential Regulations and the instructions/guidelines issued by the State Bank.
4) The branches of foreign banks operating in
Pakistan shall intimate to the State Bank, within 30 days from the date of receipt of this
Circular, regarding any similar measures taken or policies introduced by their Head
Offices with regard to above guidelines. They are required to adhere to these guidelines
wherever feasible and applicable. However, they need not necessarily seek approval of
their Board of Directors, as stipulated above in the case of local banks/DFIs.
5) All banks/DFIs incorporated in Pakistan are
required to place this Circular before their Board of Directors for meticulous compliance
and send a written confirmation, within 30 days of receipt of this circular, signed by
each board member signifying their understanding of these guidelines.
Please acknowledge receipt.
Yours faithfully,
(Jameel Ahmad)
Director
|
|
|
|
|
|
| Home | About Us | Contact | Information Resources |