MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) moved to strengthen the governance of banks as it amended its corporate governance guidelines following some high-profile mishaps in the industry.
The BSP said the policy change, which it announced on Tuesday, August 22, sets "enhanced requirements on the membership composition of the board" of banks.
"The Monetary Board (MB) approved the amendments to the BSP corporate governance guidelines raising the bar on the expectations from the board of directors and risk management systems of its supervised financial institutions (BSFIs)," the BSP said in a statement posted on its website.
The new policy requires non-executive directors, who include independent directors, to comprise a majority of the board. The prescribed number of independent directors was increased from 20% to one-third of the members of the board, or two directors, whichever is higher.
Under the policy change, an independent director may only serve for a maximum cumulative term of 9 years, and a non-executive director may concurrently serve as director in a maximum of 5 publicly listed companies, the BSP said.
The BSP has retained the existing requirement for simple rural banks to have only one independent director.
The new policy also holds that the positions of chairperson and CEO shall not be held by the same person, but "in exceptional cases when the Chairperson and the CEO is held by one person as approved by the MB, a lead independent director shall be appointed."
The BSP said this is to "promote independence of the board from management and to support an environment where the board can sufficiently challenge the actions of those involved in operations."
The BSP said the approved changes “are at par with international standards and are likewise aligned with the Securities and Exchange Commission’s Code of Corporate Governance for Publicly-Listed Companies."
The central bank also noted that the duties and responsibilities of the board of directors were streamlined to highlight accountability in 5 key areas:
The banking industry has been in the spotlight since early 2016 because of some controversies.
Last year, the Rizal Commercial Banking Corporation (RCBC) paid a record P1-billion fine for non-compliance with banking laws and regulations in connection with the $81-million Bangladesh Bank money laundering scandal.
Earlier this month, the central bank issued Circular Letter 2017-048 outlining revised implementing rules as well as tougher sanctions for all BSP-supervised personnel found to have violated Republic Act 9160 or the Anti-Money Laundering Act (AMLA) of 2001. – Rappler.com