BFIs should be happy with normal profit
KATHMANDU, May 3:
The central bank governor has advised banks and financial institutions (BFIs) to be satisfied with normal profit.
“If the banks and financial institutions still earn supernormal profit then Nepal Rastra Bank (NRB) can not shut the entry of new banks as the presence of abnormal profit indicates potential for more financial institutions,” said governor of the central bank Dr Yubaraj Khatiwada in an interaction programme on Role of Directors for Good Governance in Corporate Sector, organised by Independent Business News here in the Valley.
He pointed out that the conflict of interest arises when a potential borrower becomes promoter of a bank or financial institution. “The legal provisions are conflicting. The regulations of regulatory bodies clash which makes the implementation difficult,” he said, informing that the upcoming amendment to Banks and Financial Institutions Act aims at removing the contradictions in the current regulations. The amended Act will also clarify the entitlements of the board members of a BFI.
He also questioned the transparency of the current public shareholder election system with proxy voters. “Financial sector is relatively transparent. However, that transparency is also questionable as the financial reports of the banks show Non-Performing Assets to be less than two per cent which is not possible in the present scenario,” deputy governor Maha Prasad Adhikari said.
“The trade-offs between profit, breach of law and non-compliance should be unacceptable because they damage governance,” he said, pointing out that NRB is still lenient to non-compliance of regulations.
Former finance secretary Rameshwor Khanal dubbed the recent failure of some financial institutions as natural market phenomenon that does not translate as failure of the whole financial sector.
He advised the board of directors to scrutinise the financials of their companies on a regular basis. “If the finances are bad then no matter how good the services and how efficient the employees, the company can not survive,” he said.
Chief executive officer of Kumari Bank and former president of Nepal Bankers’ Association (NBA) Radhesh Pant said the executive board of a company should not micro-manage the company to push for more profit disregarding the long term sustainability. “Most of the board members do not appreciate the complexity of business, regulatory and legal issues,” he added.
Source: THT
The central bank governor has advised banks and financial institutions (BFIs) to be satisfied with normal profit.
“If the banks and financial institutions still earn supernormal profit then Nepal Rastra Bank (NRB) can not shut the entry of new banks as the presence of abnormal profit indicates potential for more financial institutions,” said governor of the central bank Dr Yubaraj Khatiwada in an interaction programme on Role of Directors for Good Governance in Corporate Sector, organised by Independent Business News here in the Valley.
He pointed out that the conflict of interest arises when a potential borrower becomes promoter of a bank or financial institution. “The legal provisions are conflicting. The regulations of regulatory bodies clash which makes the implementation difficult,” he said, informing that the upcoming amendment to Banks and Financial Institutions Act aims at removing the contradictions in the current regulations. The amended Act will also clarify the entitlements of the board members of a BFI.
He also questioned the transparency of the current public shareholder election system with proxy voters. “Financial sector is relatively transparent. However, that transparency is also questionable as the financial reports of the banks show Non-Performing Assets to be less than two per cent which is not possible in the present scenario,” deputy governor Maha Prasad Adhikari said.
“The trade-offs between profit, breach of law and non-compliance should be unacceptable because they damage governance,” he said, pointing out that NRB is still lenient to non-compliance of regulations.
Former finance secretary Rameshwor Khanal dubbed the recent failure of some financial institutions as natural market phenomenon that does not translate as failure of the whole financial sector.
He advised the board of directors to scrutinise the financials of their companies on a regular basis. “If the finances are bad then no matter how good the services and how efficient the employees, the company can not survive,” he said.
Chief executive officer of Kumari Bank and former president of Nepal Bankers’ Association (NBA) Radhesh Pant said the executive board of a company should not micro-manage the company to push for more profit disregarding the long term sustainability. “Most of the board members do not appreciate the complexity of business, regulatory and legal issues,” he added.
Source: THT
