Central bank delineates powers of NBFIs' directors, CEOs
Friday, 28 September 2007
FE Report
The central bank has issued directives, delineating the responsibilities and authorities of the directors and chief executive officers (CEO) of the non-banking financial institutions (NBFIs) to ensure accountability of those officials.
The central bank took the move to bring good corporate governance in management of the NBFIs by specifying the responsibilities and authorities that should be followed and exercised by the top management, official sources said.
Under the new provisions, the CEO and his subordinate executives should desirably be empowered by the board to sanction loans. No member of the board of directors should influence, directly or indirectly, the process of loan approval.
The Bangladesh Bank (BB) issued a circular in this connection Thursday and asked the chairmen and the CEOs of all NBFIs to follow the instructions for determining the authorities and responsibilities of their respective top management.
Each and every director of the NBFIs will have to be provided with a copy of this circular to ensure proper implementation of the instructions, the sources added.
"We have issued such directives to bring a check-and-balance between the board members and the CEOs of the NBFIs," a BB senior official told the FE Thursday.
The board will determine the objectives and goals of their institutions and chalk out strategies and work-plans on annual basis. It will specially engage itself in making strategies consistent with the determined objectives and goals and with issues relating to structural change and reorganisation for enhancement of institutional efficiency and other relevant policy matters. It will monitor the progress of implementation of the work-plans at quarterly rests.
The board, under the directives of the central banks, will set the key performance indicators (KPIs) for the CEO and other senior executives and have those evaluated on annual basis, according to the circular.
The board will also remain vigilant on the internal control system of the NBFIs in order to attain and maintain satisfactory qualitative standard of their loan portfolios. It shall, at quarterly intervals, review the reports submitted by its audit committee regarding compliance of recommendations made in internal and external audit reports as well as the central bank inspection reports.
"The chairman or the directors will in no way involve themselves or interfere in, or influence over, any administrative affairs including recruitment, promotion, transfer and disciplinary measures as executed under the service rules," the central bank said in its circular.
As the chairman of the board of directors does not personally have the executive jurisdiction, he will not participate or interfere in the administrative or operational and routine day-to-day affairs of the NBFIs.
In terms of the financial, business and administrative authorities vested upon him by the board, the CEO will discharge his own responsibilities. He will remain accountable for achievement of financial and other business targets by means of business plan, efficient implementation thereof and prudent administrative and financial management.
The CEO will ensure compliance of the Financial Institutions Act, 1993 and other relevant laws and regulations in discharge of routine functions of the NBFI.
Currently, 29 NBFIs are operating their business in the country.
The central bank has issued directives, delineating the responsibilities and authorities of the directors and chief executive officers (CEO) of the non-banking financial institutions (NBFIs) to ensure accountability of those officials.
The central bank took the move to bring good corporate governance in management of the NBFIs by specifying the responsibilities and authorities that should be followed and exercised by the top management, official sources said.
Under the new provisions, the CEO and his subordinate executives should desirably be empowered by the board to sanction loans. No member of the board of directors should influence, directly or indirectly, the process of loan approval.
The Bangladesh Bank (BB) issued a circular in this connection Thursday and asked the chairmen and the CEOs of all NBFIs to follow the instructions for determining the authorities and responsibilities of their respective top management.
Each and every director of the NBFIs will have to be provided with a copy of this circular to ensure proper implementation of the instructions, the sources added.
"We have issued such directives to bring a check-and-balance between the board members and the CEOs of the NBFIs," a BB senior official told the FE Thursday.
The board will determine the objectives and goals of their institutions and chalk out strategies and work-plans on annual basis. It will specially engage itself in making strategies consistent with the determined objectives and goals and with issues relating to structural change and reorganisation for enhancement of institutional efficiency and other relevant policy matters. It will monitor the progress of implementation of the work-plans at quarterly rests.
The board, under the directives of the central banks, will set the key performance indicators (KPIs) for the CEO and other senior executives and have those evaluated on annual basis, according to the circular.
The board will also remain vigilant on the internal control system of the NBFIs in order to attain and maintain satisfactory qualitative standard of their loan portfolios. It shall, at quarterly intervals, review the reports submitted by its audit committee regarding compliance of recommendations made in internal and external audit reports as well as the central bank inspection reports.
"The chairman or the directors will in no way involve themselves or interfere in, or influence over, any administrative affairs including recruitment, promotion, transfer and disciplinary measures as executed under the service rules," the central bank said in its circular.
As the chairman of the board of directors does not personally have the executive jurisdiction, he will not participate or interfere in the administrative or operational and routine day-to-day affairs of the NBFIs.
In terms of the financial, business and administrative authorities vested upon him by the board, the CEO will discharge his own responsibilities. He will remain accountable for achievement of financial and other business targets by means of business plan, efficient implementation thereof and prudent administrative and financial management.
The CEO will ensure compliance of the Financial Institutions Act, 1993 and other relevant laws and regulations in discharge of routine functions of the NBFI.
Currently, 29 NBFIs are operating their business in the country.