Mandatory banking training for BFI board members on cards
KATHMANDU, OCT 14 -
With corporate governance emerging as the banking sector’s major challenge, the central bank is gearing up to introduce a mandatory training course on governance for board members of banks and financial institutions (BFIs).
Nepal Rastra Bank (NRB) had assigned the National Banking Training Institute (NBTI) to prepare the syllabus. NBTI has already prepared several syllabi and forwarded them to the central Bank. NRB sources say course will be introduced soon.
The last fiscal year saw a few financial institutions (FIs) getting into trouble due to bad corporate governance, especially promoters’ and directors’ vested interests. Directors of two FIs—already liquidated Nepal Development Bank and Samjhana Finance which is in the process of liquidation—were involved in insider trading. Same was the story at Nepal Share Market Finance Limited. Its former executive chairman was found involved in the embezzlement of Rs 2.66 billion.
Even an NRB report has said that businessmen operating banks posed challenges to ensuring sound corporate governance. “Almost half of the directors are from the business sector with no banking knowledge or experience,” stated the latest supervision report of the central bank.
The motive behind introducing the course, according to the central bank, is to make BFIs aware about the difference between banking and other business. “Most of the BFI board members are involved in other businesses too and that they try to handle BFIs in the similar manner,” said the source. “But the banking industry is more sensitive as they collect general public’s deposits.”
Once the central bank approves the syllabi and implements the provision through a directive, board members, chairman and members of various sub-committees within the board should take the classes and get certificate to be eligible to hold the position of board member. NBTI Chief Executive Officer Sanjib Subba said a person willing to be board member must produce such a certificate before NRB and the office of the company registrar for approval.
“To get eligibility as board member, one must undertake 42 hours of lecture on a particular syllabus which includes topics like corporate governance, financial institution and market, difference between banking and other business balance sheet analysis, company act, stock market, conflict mitigation and minority stakeholders’ interest protection among other,” said Subba, “However, to be eligible for the position of chairman, one must go through one more course on leadership of similar working hours.” Syllabus designed for the chairman includes topics like leadership, conflict management, negotiation skill and strategic management, among others.
There are also separate specialised courses designed for ones willing to be members of various sub-committees like human resource committee, audit committee and budget committee.
Subba said one of the major reasons behind bad corporate governance in BFIs is unqualified people in the board and that the mandatory provision of such courses will bring board members and management to the level playing field. “At present, management and the board are unable to understand each other and the agency problem, which is conflict of interest between them, arises,” he said, “Once the board members undertake such courses, it will help a lot in resolving existing agency problem.”
Apart from the courses designed by NBTI, the regulation department of the central bank is starting one more training programme from next month. According to NRB source, the training will focus on corporate governance. “The training programme will be interactive which includes topic like corporate governance in BFIs, problems that might occur once it is not followed and punishment they might have to face,” said the source.
Source: Kantipur
With corporate governance emerging as the banking sector’s major challenge, the central bank is gearing up to introduce a mandatory training course on governance for board members of banks and financial institutions (BFIs).
Nepal Rastra Bank (NRB) had assigned the National Banking Training Institute (NBTI) to prepare the syllabus. NBTI has already prepared several syllabi and forwarded them to the central Bank. NRB sources say course will be introduced soon.
The last fiscal year saw a few financial institutions (FIs) getting into trouble due to bad corporate governance, especially promoters’ and directors’ vested interests. Directors of two FIs—already liquidated Nepal Development Bank and Samjhana Finance which is in the process of liquidation—were involved in insider trading. Same was the story at Nepal Share Market Finance Limited. Its former executive chairman was found involved in the embezzlement of Rs 2.66 billion.
Even an NRB report has said that businessmen operating banks posed challenges to ensuring sound corporate governance. “Almost half of the directors are from the business sector with no banking knowledge or experience,” stated the latest supervision report of the central bank.
The motive behind introducing the course, according to the central bank, is to make BFIs aware about the difference between banking and other business. “Most of the BFI board members are involved in other businesses too and that they try to handle BFIs in the similar manner,” said the source. “But the banking industry is more sensitive as they collect general public’s deposits.”
Once the central bank approves the syllabi and implements the provision through a directive, board members, chairman and members of various sub-committees within the board should take the classes and get certificate to be eligible to hold the position of board member. NBTI Chief Executive Officer Sanjib Subba said a person willing to be board member must produce such a certificate before NRB and the office of the company registrar for approval.
“To get eligibility as board member, one must undertake 42 hours of lecture on a particular syllabus which includes topics like corporate governance, financial institution and market, difference between banking and other business balance sheet analysis, company act, stock market, conflict mitigation and minority stakeholders’ interest protection among other,” said Subba, “However, to be eligible for the position of chairman, one must go through one more course on leadership of similar working hours.” Syllabus designed for the chairman includes topics like leadership, conflict management, negotiation skill and strategic management, among others.
There are also separate specialised courses designed for ones willing to be members of various sub-committees like human resource committee, audit committee and budget committee.
Subba said one of the major reasons behind bad corporate governance in BFIs is unqualified people in the board and that the mandatory provision of such courses will bring board members and management to the level playing field. “At present, management and the board are unable to understand each other and the agency problem, which is conflict of interest between them, arises,” he said, “Once the board members undertake such courses, it will help a lot in resolving existing agency problem.”
Apart from the courses designed by NBTI, the regulation department of the central bank is starting one more training programme from next month. According to NRB source, the training will focus on corporate governance. “The training programme will be interactive which includes topic like corporate governance in BFIs, problems that might occur once it is not followed and punishment they might have to face,” said the source.
Source: Kantipur
