SBP restricts banks board to chair audit committees

KARACHI: The State Bank of Pakistan (SBP) has restricted the board members of commercial banks, microfinance banks and DFIs to chair the audit and risk management committees meetings of the bank.

The central bank has made an amendment in the Prudential Regulations for Corporate/Commercial Banking in a circular BPRD Circular Letter No 33 of 2015 issued recently, directing the presidents and CEOs of commercial banks and DFIs to ensure compliance of the recently amended regulations. The circular reads, “The Chairman of the Board may chair and/or be a member of any one of the Board Committees except Audit and Risk Management Committees.”

However, the central bank allowed the independent directors to invariably chair the audit committee of the board.

“These committees of the board should neither indulge in day-to-day affairs/operations of the bank nor enjoy any credit approval authority for transactions/limits. These committees should apprise the board of their activities and achievements on regular basis.” The banking companies were allowed that board might form specialised committees with well-defined objectives, authorities and tenure to share the load of activities. These committees, comprising of at least one non-executive board member, shall oversee areas like audit, risk management, credit, and recruitment, remuneration and nomination etc.

However, rest of the regulation on the role of board members were put the same. The board of directors shall assume its role independent of the influence of the management and should know their responsibilities and powers in clear terms. It should be ensured that the board of directors focus on policymaking 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. 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. All members of the board should undertake and fulfil their duties and responsibilities keeping in view their legal obligations under all the applicable laws and regulations.

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.

The board shall approve and ensure implementation of policies, including but not limited to, 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 areas.


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