SBP strengthens regulatory framework for financial institutions

KARACHI: State Bank of Pakistan (SBP) on Monday issued revised corporate governance regulatory framework to further strengthen corporate governance regime of banks and Development Finance Institutions (DFIs), and to align the same with international standards and best practices.

“The framework, which has been developed in consultation with key stakeholders, covers Fit & Proper Test (FPT) criteria and other corporate governance regulatory requirements for the sponsor shareholders and beneficial owners, members of the board of directors, presidents and CEOs and key executives of banks and DFIs," the SBP said.

Under the framework, the center bank consolidated and rationalized all the existing regulatory requirements related to corporate governance to improve consistency, understanding and usability for stakeholders. It may be noted that last such amendments were introduced in 2007.

Among other changes made in the framework, the board is now required to have adequate knowledge, expertise and skill-mix related to the business model, overall size, complexity and risk profile of the bank and DFI.

Moreover, the board should have at least one female director who should not be a family member of any other director or sponsor shareholder of the bank or DFI. Further, maximum age of a president or CEO has been reduced from 70 years to 65 years.