SBP Allows Banks’ Board Members to Work in Subsidiaries

To strengthen institutional arrangements between banks and their wholly-owned subsidiaries, the State Bank of Pakistan (SBP) has decided to allow board members of a bank to also serve as board members of its associated exchange company. In this regard, the SBP has made amendments to the Corporate Governance Regulatory Framework. According to a circular issued by the SBP, “Reg G-4, Para 1(f): No person can serve as a Director and/or President/CEO of a bank/DFI if he/she holds a substantial interest or is working as Chairman, Director, CEO, Chief Financial Officer, Chief Internal Auditor, Financial Advisor, Research Analyst, Trader, or member (by whatever name/designation called) of an: Exchange Company, except that the President/CEO or Director of a bank may serve as a director of an exchange company wholly owned by that bank, subject to submission of an additional affidavit to the following institutions: A board member of the Pakistan Stock Exchange (PSX) may be appointed as a board member of any bank/DFI if he/she is an independent director of the PSX, provided that he/she does not have any association with the other categories mentioned above. A year ago, the SBP allowed banks to set up their own exchange companies to streamline forex operations within the country. Since then, a number of banks have established exchange companies after receiving approval from the SBP.