April 25, 2007	Wednesday	Rabi-us-Sani 07, 1428

KARACHI, April 24: The State Bank of Pakistan on Tuesday issued fresh instructions, saying no member of the board of directors of a bank or DFI holding five per cent or more of the paid-up capital of the bank or DFI will be appointed in any capacity except as chief executive of the bank or DFI.

Further, maximum two members of board of directors of a bank or DFI, including its CEO, can be the executive directors.

“No member of the board of directors of a bank / DFI holding five per cent or more of the paid-up capital of the bank/DFI either individually or in concert with family members or concerns/companies in which he / she has the controlling interest, shall be appointed in the bank/DFI in any capacity, except as chief executive of the bank/DFI,” said the circular.

The directors on the boards of banks or DFIs should not appoint, at the bank’s or DFI expense, any advisor(s) to assist them in discharge of their duties and responsibilities as members of the board of directors of a bank or DFI, said the circular.The State Bank said the board of directors will assume its role independently and there would be no influence of the management, and the board should know its responsibilities and powers in clear terms.

The board will clearly define the authorities and key responsibilities of both the directors and the senior management without delegating its policy-making powers to the management and shall ensure that the management is in the hands of qualified personnel, said the SBP circular.

The board should meet frequently and the individual directors of an institution should attend at least half of the meetings held in a financial year.

The board should ensure that it receives sufficient information from the management on the agenda items well in advance of each meeting to enable it to effectively participate in and contribute to each meeting.

The board should carry out its responsibilities in such a way that external auditors and supervisors can see and form judgment on the quality of board’s work and its contributions through proper and detailed minutes of the deliberations held and decisions taken during the board meetings.

The board should ensure that it receives management letter from the external auditors without delay. It should also be ensured that appropriate action is taken in consultation with the audit committee of the board to deal with control or other weaknesses identified in the management letter, said the SBP.