The Presidents/Chief Executive Officers,
AMENDMENT IN DEFINITION OF RELATED PARTY – PRUDENTIAL REGULATIONS FOR
CORPORATE / COMMERCIAL BANKING
Please refer to BPRD Circular No. 06 of 2014 whereby revised Prudential Regulations (PRs) for Corporate / Commercial Banking were issued to all banks/DFIs.
2. In this regard, based on the representations received from the banking industry, the Para (d) of definition No. 33 - “Related Party” of Part-A of PRs for Corporate / Commercial Banking is revised as follows:
- Nominee director, appointed by Federal / Provincial Government by virtue of their shareholding, and;
- Common independent director between bank/DFI and a borrowing entity,
shall not be taken into account for establishing the relationship of related party, provided the independent director fulfills the criteria, as specified in relevant provisions of laws and regulations, for assessment of independence. Provided further that the related party relationship shall include the personal or family business interests of such director”.
3. The application of revised definition of ‘Related Party’ shall be limited to Regulation R-1 of PRs for Corporate/Commercial Banking. Banks/DFIs are advised to follow the regulation in letter and spirit. Any deviation or non-compliance of the same shall attract punitive action under the relevant provisions of the Banking Companies Ordinance, 1962.
4. All other instructions on the subject shall, however, remain unchanged.
Please acknowledge receipt.