Please refer to the BSD Circular No. 3 of 2007 titled ‘Policy Framework in Banks / DFIs’ and BSD Circular No. 04 of 2006 titled ‘Revised Forms of Annual Financial Statements’.
2.	Keeping in view the ever expanding risk profiles and the direct link of risk taking behaviour with remuneration, there is a need to align the remuneration practices with internationally adopted best principles and standards. Therefore, in order to provide banks/DFIs with detailed policy guidance on the subject, State Bank of Pakistan has developed ‘Guidelines on Remuneration Practices’ and minimum benchmarks for ‘Additional Disclosures on Governance and Remuneration’. The central idea of these guidelines is to make the Board and senior management of banks / DFIs more accountable and responsible, and to align their compensation with risk adjusted performance. The accountability of Board and senior management also require that the remuneration policies of the institutions and compensation of their Directors and Executives be disclosed in a fair, transparent and timely manner.
3.	The banks should prepare a comprehensive, transparent and fair remuneration policy and remuneration setting mechanism in accordance with the guidelines annexed with this Circular latest by June 30, 2016 and shall report the compliance of the same to the SBP. For this purpose, the banks shall submit their remuneration policy, duly approved by their Board, to SBP for information, within 15 days of the deadline. The ultimate responsibility for the compliance with these guidelines rests with Board of Directors of a Bank and top management.
4.	DFIs may appropriately comply with the requirements of these guidelines in accordance with their size, nature of business and complexities of their operations.  The DFIs shall also submit a copy of their remuneration policy, duly approved by their Board, to SBP for information, within 15 days of June 30, 2016.
5.	The banks/DFIs will be required to disclose the remuneration related matters in accordance with ‘Additional Disclosures on Governance and Remuneration’ (attached as Annexure-A to the subject guidelines) on annual basis. These disclosures requirements shall become effective from December 31, 2016.
6.	In accordance with the new disclosures, the Note No. 39 of existing Forms of Disclosures, prescribed through BSD Circular No. 04 of 2006, stands replaced with Tables 3 and 4 as given in the  ‘Additional Disclosures on Governance and Remuneration’. Further, suitable amendments shall be made in the contents under Note No. 30 i.e., ‘Administrative Expenses’ as prescribed in Table-4 of new Forms of Disclosures. The banks/DFIs shall provide the information about items enlisted under the ‘Qualitative Disclosures’ in a separate section related to Corporate Governance in Chairman’s Report.
7.	The banks/DFIs are expected to follow the guidelines on remuneration practices and provide meaningful and detailed disclosures, in letter and spirit.
	Please acknowledge receipt. Encls: Guidelines & Disclosures (Annexure-A) .