Saturday, January 12, 2019

Banks may need central bank permission to appoint CEO

The government is planning to introduce a new law, which will require banks and financial institutions to get approval from central bank before appointing their chief executive officers (CEO), though promoters are not happy with the regulatory body’s plan.
Nepal Rastra Bank (NRB) is in the process of amending the Banks and Financial Institutions Act (BAFIA) including a provision that calls for central bank's approval to appoint chief executive officer. "The board of directors of BFIs will need to get go-ahead of central bank before naming its chief executive," according to a source at the central bank.
"The provision is thought as the BFIS are appointing their yes-man hurting the corporate governance," he said, adding that the banking industry is completely different from other businesses as they are the custodians of public money. "Therefore, the chief executive should not only be responsible to the board of directors but also to the depositors."
The chief executive manages the bank, and he should be made more responsible for the public money, he added.
Due to enough regulatory directions, the BFIS are claimed to be the most transparent and accountable sector. The central bank new move is thus feared to micro manage BFIs. According to the proposed provision, the BFIs will send three proposed names to the central bank and the regulatory authority will appoint one of them as the chief executive of the BFI.

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