SBP sets new remuneration limit for board meeting

KARACHI: The State Bank of Pakistan (SBP) has fixed up to Rs800,000 as the maximum limits of remuneration for a bank’s board meeting, it said on Saturday.

The limit is for those banks / development financial institutions (DFIs) which have above Rs500 billion assets size or above Rs1 billion after tax profit as per last audited annual accounts. All other banks / DFIs which do not fall in the first category have maximum limits of remuneration for a board / committee meeting of up to Rs500,000.

“These are the maximum remuneration limits,” the SBP said in a statement. “Banks / DFIs may determine remuneration of their board members (including the chairman) taking into consideration their own governance structure and the level of responsibility and expertise of the concerned directors while remaining within the maximum limits as per their respective category and other instructions given in the circular.”

Banks / DFIs are advised to ensure compliance with the new rules within six months. “The non-compliance shall attract punitive action under relevant provisions of the Banking Companies Ordinance, 1962,” the SBP said.

The SBP said it would review the remuneration limits along with thresholds for assets size and profitability after every three years.

The SBP amended the prudential regulation, which deals with the remuneration of board members of banks / DFIs.

“The banks/DFIs may pay a reasonable and appropriate remuneration to their board members,” it said.

The central bank said board’s remuneration committee should formulate a comprehensive and transparent remuneration policy for the chairman and other directors. “This policy should be made with clear mandate and charter keeping in view the ownership structure, governance mechanism, risk profile, scope of operations, performance of the bank / DFI, and shall be approved by the shareholders of the bank / DFI on pre or post facto basis in the annual general meeting.”

The SBP said remuneration should be fixed in rupees invariably. “Nevertheless, payment of the same can be made to foreign directors in equivalent foreign currency(ies), where necessary.”

The remuneration of a director for performing extra services, including the holding of the office of chairman, might additionally be determined with the approval of the shareholders up to 20 percent of the remuneration set for him / her with proper justification in the remuneration policy.

The remuneration does not include traveling, boarding and lodging expenses of a director for attending a board meeting. “The remuneration policy should clearly specify the parameters for such expenses whereas any additional costs should be borne by the concerned director.” Financial institutions could not pay any additional remuneration to the non-executive directors and chairman. “No such remuneration should be paid to the executive directors except usual TA / DA (transport / dearness allowances) as per the bank / DFI’s standard rules and regulations.”