Please refer to BPRD Circular No. 4 dated April 23, 2007 read with Regulation G-1(A) of the Prudential Regulations for Corporate/Commercial Banking, as amended from time to time, on the above subject.
2. The State Bank of Pakistan (SBP) has been endeavoring to strengthen corporate governance regime in line with the international best practices. In this regard, a comprehensive FPT Criteria is already in place for Board members, Chief Executive Officers (CEOs) and Key Executives of Banks/DFIs. In order to make the FPT Criteria more objective and to ensure succession planning and diversity of the knowledge/experience base of the management, it has been decided to revise the instructions on the subject as detailed in following paragraphs.
3. The term “Key Executive” shall mean key executives of Banks/DFIs and include the following functional responsibilities:
(a) Any executive, acting as second to CEO, by whatever name called, and including the Chief Operating Officer (COO) and Deputy Managing Director.
(b) Chief Financial Officer/Head of Finance/Head of Accounts
(c) Head of Internal Audit
(d) Country Treasurer/Head of Treasury Operations
(e) Head of Risk Management
(f) Head of Operations
(g) Head of Compliance
(h) Head of Human Resource (HR)
(i) Head of Information Technology (IT)
(j) Head of Islamic Banking
(k) Overseas Executives (as defined in BPRD Circular No.5 of 2009)
(l) Head of Credit and/or Corporate, SME, Consumer, Wholesale, Retail etc.
(m) Company Secretary
(n) Any other executive directly reporting to the CEO/President and/or COO.
The above-mentioned positions play a key role in the performance and stability of an institution and need to be manned by competent individuals on continuous basis. Therefore, the Banks/DFIs shall ensure that none of the above posts shall be filled by an executive on acting/additional charge basis for more than three (3) months.
4. Further, to ensure compliance with SBP’s FPT Criteria in respect of appointment on key positions, the Banks/DFIs shall conduct prior self assessment of the fitness and propriety of their Directors, Presidents/CEOs and Key Executives and furnish an undertaking to this effect as per enclosed Annexure-IV. Any FPT documents received without the undertaking shall not be considered by SBP.
5. Moreover, the appointment, compensation package (including retirement benefits), promotion/demotion and renewal of the employment contracts of Key Executives (as defined in para 3 above) shall invariably be approved by the Board of Directors or the concerned Board Committee of the Bank/DFI. The Board of Directors shall also formulate an organization-wide rotation policy within three (3) months of the date of this circular, inter-alia ensuring that the Key Executives are rotated appropriately after having served on a particular position for a reasonable time (five to six years). However, for those Key Executives who have already completed six years in the same position, the rotation should take effect immediately after implementation of rotation policy. Under extreme situations only, the positions of Head of IT, Treasury, HR and Islamic Banking may be exempted from compulsory rotation.
6. Accordingly, the Banks/DFIs shall ensure that all fresh appointments as well as reappointments and/or renewals of employment contracts of Presidents/CEOs, Directors and Key Executives are strictly made in accordance with the revised instructions.
7. Failure to comply with the instructions contained in this circular and the FPT Criteria shall invoke penal provisions of the Banking Companies Ordinance, 1962.
8. All other instructions on the subject shall remain the same.
9. Please acknowledge receipt.
Encl: As above