BSP amends rules on bank directors
The Bangko Sentral ng Pilipinas (BSP) will require banks to have non-executive board directors and up to two independent officials for commercial and thrift banks to encourage “critical exchange of views and exercise of objective judgment.”
The BSP’s Monetary Board aproved the policy changes to the number of independent directors and effectively increasing it from 20 percent to onethird of the members of the board. Rural banks however will still have only one independent director.
Independent directors will have a maximum term of nine years while a non-executive director is allowed to serve as director in five publicly listed corporations.
In a statement Tuesday, the BSP said they amended supervisory expectations and “minimum prudential requirements on risk governance and compliance functions.”
“The policy provides a framework for risk governance that integrates the principles set out in other risk-related issuances of the BSP under one umbrella. It likewise covers principles on risk data aggregation and risk reporting,” it said.
The same statement said these amendments to its corporate governance guidelines is “raising the bar on the expectations from the board of directors and risk management systems of its supervised financial institutions.”
“The policy change, which is anchored on the fundamental principle that the tone of good governance should come from the top, sets out enhanced requirements on the membership composition of the board,” according to the BSP.
The new policy also ensures that the board of directors will have a collective mix of individuals with the “expertise and competence” to run a bank, and to promote independence where directors could “sufficiently challenge the actions of those involved in operations”. To this end, the position of chairperson and CEO will not be handled by just one official. If there is an exceptional case, then the BSP will appoint a lead independent director.
The BSP said members of the board of a bank should “promote a culture of good governance by adopting policies and displaying practices that maintain a balance between rewarding effective and efficient performance and upholding consistent adherence with the values of the organization.”
The central bank listed “streamlined” board of directors’ accountabilities which are: shaping the corporate culture and values; setting out objectives and strategies and oversight on management’s implementation thereof; appointing key members of senior management and control functions; overseeing the corporate governance framework; and adopting a robust risk governance framework.