The monetary authorities plan expanding the number of independent directors in the various banks across the country as part of a menu of policy initiatives the Bangko Sentral ng Pilipinas (BSP) has prepared for quick adoption.
Instead of the mandatory two independent directors in any bank board, for instance, the BSP said there should be at least three.
The law provides for a minimum of five up to 15 board directors in any bank. In the case of mergers or consolidation, the headcount must not exceed 21. According to BSP Circular 749, banks must have at least two independent directors, or 20 percent of the total headcount.
Deputy BSP Governor Nestor A. Espenilla said the plan is to expand the number to three or the equivalent of at least one-third of the banks’ board complement.
Independent directors, as defined by the BSP, are given the responsibility of safeguarding the interests of the broader public and minority stakeholders independently from the firm’s majority owners.
Earlier in July, the Rizal Commercial Banking Corp. (RCBC) reorganized its board and appointed seven, or more than half, the number of independent directors to its 15-member board.
This was after the bank was involved with the $81-million money-laundering scandal in February, where stolen funds from the Bank of Bangladesh were transmitted to the RCBC Jupiter branch in Makati City.
Several investigations regarding the scandal have wrapped up and the Anti Money Laundering Council filed several criminal complaints against particular personalities.
On the subject of the chairman of the board concurrently serving as CEO, Espenilla said: “In an ideal setting, this should be separated roles. We’re going to transition to that separation. There’s also recognition in certain cases that it might not be possible and, if that’s the case, then there has to be a strong reason this concentration of power should continue.”
Should this case persist, Espenilla said safeguards should be put in place, including the designation of a lead independent director, to put more balance to the power equation in the corporate board.
Espenilla bared a proposal dismissing the corporate secretary and compliance officer from the board in cases of conflict of interest.
“There are many proposals coming up. This will not necessarily come as one big circular but can come in several pieces. We will try to elevate further the quality of corporate governance, particularly in banks,” he added.
The central bank is working on quite a number of policy initiatives targeted for release next year.
Espenilla said the BSP has over 82 policy initiatives lined up covering all aspects and institutions affiliated with the financial industry.
“Many of those are targeted next year,” Espenilla said at the Chamber of Thrift Banks general assembly on Wednesday.
Espenilla said the general public can expect a class of regulations in 2017 that will fortify the regulations on corporate governance, on better management of conflicts of interest within a financial institution, and on a healthier posture against money laundering.
“I don’t think it’s a question of a single bank affecting no one but itself, but rather of one bank affecting others by reason of their judgment or misjudgment,” he said.