Banks comply with tighter rules on governance

Banks are increasing the number of board seats in compliance with the tighter corporate governance rules issued by the Bangko Sentral ng Pilipinas (BSP).

Security Bank Corp. said yesterday it has received the green light from the BSP as well as the Securities and Exchange Commission (SEC) to amend its articles of incorporation and increase the number of board seats to 15 from the previous 11.

With the approval for the increase in board seats, the four directors – Social Security System commissioner Diana Aguilar, Asian Institute of Management president Jikyeong Kang (independent), former tourism secretary Ramon Jimenez (independent), and former PLDT president Napoleon Nazareno (independent) – who were elected last April would now formally assume their responsibility as board members.

Alberto Villarosa chairs the board of Security Bank Corp. while Alfonso Salcedo Jr. serves as president and CEO.

With the recomposition, Security Bank now has six independent directors versus the regulatory requirement of five independent directors. Board representatives from Japan, Korea, Taiwan, and the US complement the Filipino-Chinese in the bank’s board.

Gotianun-led East West Banking Corp. also raised the number of board of directors to 11 from nine to enhance the bank’s effectiveness in conducting its business.

The BSP has adopted tighter corporate governance standards for banks and nonbanks, raising the bar on the expectations from the board of directors and risk management systems.

“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,” the BSP said.

The regulator said non-executive directors including independent directors should now comprise majority of the board of directors to make sure it is comprised of a collective mix of individuals who possess the expertise and competence to effectively manage the financial institution.

The BSP also increased the prescribed number of independent directors to one-third of the members of the board from 20 percent, or two directors, whichever is higher to promote an environment that fosters critical exchange of views and exercise of objective judgment.

On the other hand, consistent with the proportionality principle, the BSP retained the existing require- ment for simple rural banks to have only one independent director.

Under the new guidelines, an independent director may only serve as such for a maximum cumulative term of nine years and that a non-executive director may concurrently serve as director in a maximum of five publicly listed companies.