NRB will notify promoters about CEOs who underperform

KATHMANDU, NEPAL

 The Nepal Rastra Bank (NRB) will inform the board of directors concerned about the under-performing chief executive officers (CEO) of the banks and financial institutions. The central bank feels that the financial health of not just the banks and financial institutions but the whole country can be affected as the CEOs will always be involved in their private business and will only serve their personal interest no matter how well they are paid.

NRB will inform the boards of under-performing banks and financial institutions about their CEOs as per the standards set on the basis of supervision by the central bank’s as it does not just raise the cost of the institutions but affects the whole financial sector in the long run. “This has been done as per the regular supervisory role of the central bank,” Deputy Governor Maha Prasad Adhikari stated and mentioned that good governance of the banks and financial institutions has been targeted to make the management more responsible. NRB argues that informing the boards will create an environment like that of surprise inspections and will make the management more responsible.

NRB has evaluated the managerial efficiency of CEOs on the basis of policy directives, operating cost, management of staffers, professional agenda, timely meetings and work-place activities. The central bank has not revealed the names of inefficient CEOs on the basis of those standards but NRB sources claimed that Shovan Dev Pant of Lumbini Bank, Ratna Raj Bajracharya of IME Global, Anil Gyawali of Nabil, Ajay Shrestha and other two are among the better CEOs. NRB officials claim that this provision will allow the boards to know about the supervision of the management and even make necessary interventions.

The central bank earlier had introduced the provision banning the board members from playing a managerial role stating that governance of some banks and financial institutions was weakened due to unnecessary interference of the board members. This provision of informing the boards about the performance of CEOs after separating the roles of promoters and managers is said to have targeted the management heads. The central bank, however, claims that prior information to the boards provided with an aim of not letting the banks and financial institutions fail due to managerial inefficiency will help improve the banks and financial institutions.    

Source: Karobar Daily, May 4th 2013

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Nepal Rastra Bank Governor discourages bank directors from dual role

KATHMANDU: The central bank governor reprimanded directors of financial institutions for their dual character — for acting like an industrialist while serving in a bank’s board.

“Bank directors are full of paradoxes. Those who are industrialists are not sure whether they want low or high interest rates. One day, they represent the banking community and explain their inability to lower rates while the next day they are demanding for lowered rates for industries,” said Nepal Rastra Bank (NRB) governor Dr Yubaraj Khatiwada, during the inauguration of the first ever Directors’ Conference organised by National Banking Training Institute here today.

“There are other conflicts of interest as well, such as promoter share holders are employed in the banks,” he added.

The regulator also urged the directors of financial intermediaries not to encourage unwarranted risk-taking for speedy profit that might deteriorate the financial health of the companies.

“It is the responsibility of directors to keep the company’s management in check and ensure corporate governance is followed but they should refrain from micromanaging everyday business,” he said.

“In recent times, the Nepali banking sector has been witnessing problems arising from lack of internal control and bad governance so directors should try to enforce ethics in the management,” added the governor.

Dr Khatiwada also told the directors to comprehend that they do not become owners of a company just because they have invested money in it. “Companies,

especially financial institutions, are not owned by the promoters or directors. The management and the board are equally responsible for the safety of the interests of depositors and creditors,” he said.

“Directors should not expect high profits in a short span because banking business does not yield overnight profits,” the governor added, emphasising on the need of banking and management knowledge for directors and not the ownership of bank shares.

Over 100 directors of listed companies attended the conference, aimed at creating a knowledge sharing platform. At present, there are 226 listed companies at Nepal Stock Exchange with a combined paid up capital of Rs 121 billion. There are more than 2000 board of directors governing these listed companies.

“Listed companies have different dynamics as compared to privately owned businesses and the governance of these companies requires advanced knowledge, skills and expertise preferably in the core areas of operation,” said chairman of Securities Board of Nepal Baburam Shrestha.

Insurance Board chairman Prof Dr Fatta Bahadur KC also stressed on the importance of constant dialogue between directors and management.

Source: The Himalayan Times, 18th April 2013
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NRB relaxes Know Your Customer rules

The Nepal Rastra Bank has allowed banks and financial institutions (BFIs) to determine themselves the requirements that customers have to fulfil while opening bank accounts with deposits less than Rs 500,000.

Moreover, people can also open bank accounts by producing photocopies of passport, permanent account number (PAN) cards, identity cards of government, public and private offices. In case of teachers, professors and other staff of government schools, colleges and universities, they can open accounts by producing photocopies of their identity cards provided by the institutions they are working, states new “Know Your Customer” directive issued on Friday.

The revised directive has also removed the earlier provision that required individuals to produce citizenship number of ancestors going back to three generations, limiting the requirement to disclosure of personal information and names and surname of three generations.

“The new KYC directive has surprised me because the NRB has given us more than what we wanted,” said Ashoke Rana, chief executive officer of Himalayan Bank Limited. “This has enabled all to open accounts. This will help increase the number of bank accounts.”

The central bank’s move came after complains from BFIs that the previous provisions caused sharp decline in new account opening and even old depositors started closing their accounts.

“The move was taken to ease account opening and is based on international practices,” said NRB Spokesperson Bhaskarmni Gnawali. “We simplified the provision after consultations with the Financial Information Unit (FIU), which looks after money laundering issues.”

According to the NRB directive, this provision is only applicable to those willing to open new accounts. Existing accountholders will not have to produce new documents. Gnawali, however, said the provisions for foreigners have not been revised.

President of Nepal Bankers’ Association Rajan Singh Bhandari welcomed the NRB move, saying it would encourage account opening at a time when existing accountholders were also seeking to close their accounts due the lengthy re-verification process. “Letting people open bank accounts by producing documents other than citizenship certificates is a welcome move. Such practices are prevalent in the US and Europe too,” he said.

Source: ekantipur.com, 6th April 2013

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