In exercise of the powers vested under
the relevant provisions of Banking Companies
Ordinance, 1962, the State Bank of Pakistan
is pleased to further amend the Para 2 of
Section ‘C’ of Prudential Regulation
G-1, which inter-alia deals with the remuneration
of Board members of banks/DFIs, earlier
amended vide BPRD Circular No. 09 of 2015,
to read as under:
“The banks/DFIs may pay a reasonable
and appropriate remuneration to their
Board members, as per the following parameters:
a) Board’s remuneration committee
shall formulate a comprehensive and transparent
remuneration policy for the Chairman and
other Directors. This policy should be
made with clear mandate and charter keeping
in view the ownership structure, governance
mechanism, risk profile, scope of operations,
performance of the bank/DFI, etc.; and
shall be approved by the shareholders
of the bank/DFI on pre or post facto basis
in the annual general meeting.
b) Remuneration shall be fixed in Pakistani
rupees (PKR) invariably; nevertheless,
payment of the same can be made to foreign
Directors in equivalent foreign currency(ies),
where necessary.
c) While determining remuneration of
a Board member (including the Chairman)
for attending a Board and/or its committee
meeting(s), following maximum limits should
be observed:
| Category |
Parameters
to Determine Category |
Maximum
Limits of Remuneration for a Board/
Committee Meeting |
|
First |
Those banks/DFIs
which have:
Above Rs. 500 billion Assets Size
OR
Above Rs. 1 billion after tax
profit
(As per last audited annual accounts)
|
Up to Rs.
800,000 |
|
Second |
All other
banks/DFIs which do not fall in
the first category |
Up to Rs.
500,000 |
These are the maximum remuneration limits.
Banks/DFIs may determine remuneration
of their board members (including the
Chairman) taking into consideration their
own governance structure and the level
of responsibility & expertise of the
concerned directors while remaining within
the maximum limits as per their respective
category and other instructions given
in the circular. Further, the remuneration
limits along with thresholds for assets
size and profitability defined in above
table will be reviewed by SBP after every
three years.
d) The remuneration of a director for
performing extra services, including the
holding of the office of Chairman, may
additionally be determined with the approval
of the shareholders, as the case may be,
up to 20% of the remuneration set for
him/her under clause (c) of this Para,
with proper justification in the remuneration
policy.
e) Traveling, boarding and lodging expenses
of a Director for attending Board and/or
its committee meeting(s) shall be paid
by the bank/DFI at actuals. In this regard,
the remuneration policy should clearly
specify the parameters for such expenses
whereas any additional costs should be
borne by the concerned Director.
f) Banks/DFIs shall also ensure that
no additional payments or perquisites
are paid to the Non-Executive Directors
and Chairman except as mentioned in above
clauses.
g) No such remuneration should be paid
to the Executive Directors except usual
TA/DA as per the bank/DFI’s standard
rules and regulations.
h) The remuneration policy of a bank/DFI
should also include the provisions to
deal with the remuneration of underperforming
Director(s) based on their performance
evaluation conducted as per guidelines
issued vide BPRD Circular No. 11 of 2016.
i) The remuneration policy should adequately
envisage provisions for accountability
of the Directors for their conduct according
to the scope of their responsibilities
and scale of remuneration.
j) No consultancy or allied work shall
be awarded to a Director or to the firm(s),
institution(s) or company(ies) etc. in
which he individually and/or in concert
with other Directors of the same bank,
holds substantial interest.
k) The administrative expenses pertaining
to the office, staff and security allocated
to the Chairman of the Board should be
determined rationally.
l) Proper and transparent disclosure
of remuneration and other benefit/facility
provided to the Board members, shall be
made in the annual financial statements
of the bank/DFI.
2. The above instructions are applicable
to all banks/DFIs and they are advised to
ensure compliance within six months of the
issuance of this Circular. The non-compliance
shall attract punitive action under relevant
provisions of the Banking Companies Ordinance,
1962.
3. All other instructions on the subject
shall remain unchanged.