Nepal Bankers Association (NBA) has requested Nepal Rastra Bank (NRB)
to scrap its directive that bars banks and financial institutions from
electing, nominating or appointing any board member, chairman or CEO for
more than two consecutive terms.
Presenting its suggestions to the upcoming Monetary Policy 2015/16 and Unified Directives recently, NBA urged the central bank to remove such restriction altogether, reasoning that such provision contravenes with the Bank and Financial Act 2063.
The policy was introduced by former Governor Yubaraj Khatiwada through the Monetary Policy of last fiscal year 2014/15 as an attempt to 'ensure corporate governance in the BFIs'.
"Corporate governance has been found weak among BFIs where a single person remained in the post of chairman, director, CEO, and managing director for a long time," the monetary policy of 2014/15 read.
"Since the right of the depositors is not guaranteed in those institutions, a provision will be introduced by the BFIs so that the same person cannot be elected, nominated or appointed in the post of chairman, managing director, and CEO for more than two consecutive terms," it added.
Arguing that such restriction was tantamount to the central bank's micromanagement of BFIs, bankers have been opposing such provisions from the very beginning.
"Banks can retain its CEO as long as s/he performs well or the board of directors (BoD) and bank's executive could be compatible with each other. So, this provision may not be practical," the then vice-president of NBA, Upendra Poudyal, had told Republica.
The bankers have raised the issue again at a time when the central bank is preparing monetary policy for fiscal year 2015/16. "The provision to limit the term of bank's CEO and board members contravenes with the respective laws. So it should be scrapped," reads the charter of suggestions submitted to NRB by NBA.
"The Article 1 of Bank and Financial Act 2063 clearly states that the appointment of board directors will be made by the annual general meeting of the respective BFIs within the limit of Article 18. Similarly, there is provision in Clause 4 of Article 26 which states that the tenure of the CEO shall be of four years and shall be re-appointed," NBA's suggestion reads. "Thus, the central bank's circular directing BFIs to amend their bylaws to include the provision whereby the chairman/board member/CEO will not be allowed to be elected, nominated and appointed contravenes with the law so the directive should be scrapped," it added.
Though the bankers were opposing such provision from the very beginning, the central bank had enforced the policy issuing a circular on February 16, instructing them to amend their bylaws through their AGMs to ensure implementation of such restriction.
According to a high-level official at the central bank, the bankers have been intensifying their lobby with the newly appointed Governor Chiranjibi Nepal to reverse the provision introduced by his predecessor Yuba Raj Khatiwada. "The bankers are making strong efforts to persuade Governor Nepal, who they assume as pro-market, to roll back some of the provisions which they claim are against free market economy," the official told Republica, requesting anonymity.
source:SAGAR GHIMIRE,republica,7 july 2015
LINK
Presenting its suggestions to the upcoming Monetary Policy 2015/16 and Unified Directives recently, NBA urged the central bank to remove such restriction altogether, reasoning that such provision contravenes with the Bank and Financial Act 2063.
The policy was introduced by former Governor Yubaraj Khatiwada through the Monetary Policy of last fiscal year 2014/15 as an attempt to 'ensure corporate governance in the BFIs'.
"Corporate governance has been found weak among BFIs where a single person remained in the post of chairman, director, CEO, and managing director for a long time," the monetary policy of 2014/15 read.
"Since the right of the depositors is not guaranteed in those institutions, a provision will be introduced by the BFIs so that the same person cannot be elected, nominated or appointed in the post of chairman, managing director, and CEO for more than two consecutive terms," it added.
Arguing that such restriction was tantamount to the central bank's micromanagement of BFIs, bankers have been opposing such provisions from the very beginning.
"Banks can retain its CEO as long as s/he performs well or the board of directors (BoD) and bank's executive could be compatible with each other. So, this provision may not be practical," the then vice-president of NBA, Upendra Poudyal, had told Republica.
The bankers have raised the issue again at a time when the central bank is preparing monetary policy for fiscal year 2015/16. "The provision to limit the term of bank's CEO and board members contravenes with the respective laws. So it should be scrapped," reads the charter of suggestions submitted to NRB by NBA.
"The Article 1 of Bank and Financial Act 2063 clearly states that the appointment of board directors will be made by the annual general meeting of the respective BFIs within the limit of Article 18. Similarly, there is provision in Clause 4 of Article 26 which states that the tenure of the CEO shall be of four years and shall be re-appointed," NBA's suggestion reads. "Thus, the central bank's circular directing BFIs to amend their bylaws to include the provision whereby the chairman/board member/CEO will not be allowed to be elected, nominated and appointed contravenes with the law so the directive should be scrapped," it added.
Though the bankers were opposing such provision from the very beginning, the central bank had enforced the policy issuing a circular on February 16, instructing them to amend their bylaws through their AGMs to ensure implementation of such restriction.
According to a high-level official at the central bank, the bankers have been intensifying their lobby with the newly appointed Governor Chiranjibi Nepal to reverse the provision introduced by his predecessor Yuba Raj Khatiwada. "The bankers are making strong efforts to persuade Governor Nepal, who they assume as pro-market, to roll back some of the provisions which they claim are against free market economy," the official told Republica, requesting anonymity.
source:SAGAR GHIMIRE,republica,7 july 2015
LINK
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