KARACHI, July 1: The State Bank of Pakistan has changed the instructions issued earlier on January 1 this year on ineligibility of the stock brokers, those associated with money changing business or having link with the brokerage house to be director on the board of the banks and the financial institutions.

In a circular issued on Monday, the State Bank has now declared those persons ineligible to become director or a nominee director, who are holding substantial interest (not less than 20 per cent of the shares) or are working as Chairman, Director, Chief Executive, Chief Financial Officer, Chief Internal Auditor, Research Analyst or Trader of: (i) Money Changer (firm or sole partnership) (ii) Member of a Stock Exchange (iii) Corporate Brokerage House (iv) Any company or entity owned and controlled by the persons in these three category of entities.

All those persons who are acting as consultants, advisers of banks and the financial institutions are also ineligible to become directors.

However, any person can become a director of a bank and financial institution if he has a minimum holding of 10 per cent or above in the bank and NBFI where he intends to become a director with the approval of the State Bank of Pakistan.

The State Bank has asked the banks and the DFIs having directors on their boards who do not meet the criteria set in this circular have been advised to regularize their positions by end of this month.

Earlier on January 1 this year the State Bank of Pakistan has declared all those persons ineligible to be directors on the boards of the banks and DFIs who are directly or indirectly associated with the business of stock market, money changing and the brokerage houses.

The circular had instructed the banks and the DFIs having such category of persons on their respective boards as directors to regularize their positions by March 30.

“Considering the potential of conflict of interest in their business and with the business of banking to ensure the integrity of banking business,” the SBP circular has justified the decision to forbid all such categories of persons to be on the board of banks and the DFIs.

This period was then extended till end June through another circular on March 21. In the latest circular on Monday the State Bank said that the matter has been reviewed and it has been decided to substitute the instructions in this regard in the original circular.