Bangko Sentral ng Pilipinas. INQUIRER.net FILE PHOTO
The Bangko Sentral ng Pilipinas (BSP) has issued new corporate governance rules that will promote banks’ boards independence from the management.
In a statement Tuesday, the BSP said the Monetary Board, its highest policy-making body, recently approved “enhanced requirements on the membership composition of the board,” which it said was “anchored on the fundamental principle that the tone of good governance should come from the top.”
“This is aimed at ensuring that the board of directors is comprised of a collective mix of individuals who possess the expertise and competence to effectively manage the financial institution,” the BSP explained.
“The amendments also aim to promote an environment that fosters critical exchange of views and exercise of objective judgment,” it added.
In particular, the new BSP guidelines required that the positions of chairperson of the board and chief executive officer of banks must not be held by only one person in order to “promote independence of the board from management and to support an environment where the board can sufficiently challenge the actions of those involved in operations.”
But in exceptional cases wherein the Monetary Board approved a single person as chair and CEO, there must be another lead independent director to be appointed by the bank, the BSP said.
Also, the new rules mandated that non-executive directors, including independent directors, must compose the board majority.
The number of independent directors must also increase to one-third of the board membership from 20 percent previously, or two directors, whichever is higher.
As for rural banks, the Monetary Board kept the existing requirement of only one independent director, the BSP said, citing the proportionality principle.
“The policy further provides that an independent director may only serve as such for a maximum cumulative term of nine years and that a non-executive director may concurrently serve as director in a maximum of five publicly listed companies,” the BSP added.
As a whole, the BSP said it aims to “promote a culture of good governance by adopting policies and displaying practices that maintain a balance between rewarding effective and efficient performance and upholding consistent adherence with the values of the organization” through the amended corporate governance rules.
“In this respect, duties and responsibilities of the board of directors were streamlined highlighting accountabilities in five key areas specifically related to: shaping the corporate culture and values; setting out objectives and strategies and oversight on management’s implementation thereof; appointing key members of senior management and control functions; overseeing the corporate governance framework; and adopting a robust risk governance framework,” according to the BSP. JPV