NRB caps Class B‚ C chief executives salary
KATHMANDU:
The central bank has directed the financial institutions — except class A commercial banks — to determine the remuneration for their CEOs based on the institution’s financial indicators.
Nepal Rastra Bank (NRB) has issued guidelines for class ‘B’, ‘C’ and ‘D’ financial institutions — development bank, finance company and microfinance — regarding the salary for their chief executives. The central bank has asked the financial institutions to fix the salary of CEO based on the financial institutions’ business size, size of lending and deposits, size of operating profit, return on capital among others in the last three years.
Moreover, the financial institutions’ sub-committee formed to manage salary and benefits of the employees can determine the salary of CEO keeping in mind not only the past indicators but also considering the future steps of the financial institution and potential risks while choosing their chief executive.
“The final say in determination of the salary remains with the executive board of financial institutions though the decision also needs to be approved by the central bank,” it said.
It has also tried to reduce the large gap between the salary of CEOs and other junior level staffs asking the financial institutions to determine the salary of each job level justifiably based on the above mentioned financial indicators.
“It will make financial institutions more prudent in fixing the salary to their employees,” said spokesperson for NRB Bhaskar Mani Gyanwali.
The regulations for financial institutions are next in the series of central bank’s attempt at regulating pays and perks of CEOs. The guidelines made public last December had put the cap on the salary and benefits being doled out to the CEOs of class ‘A’ financial institutions causing the huge furore among the highly paid bankers. The central bank argued that it had issued the guidelines to curb the high risk taking tendencies among the CEOs in the view of obtaining added perks and benefits.
The regulation only allowed commercial banks to provide their CEOs fixed annual compensation between pay up to five per cent of total average expense for all employees over the last three years or 0.025 percent of the total assets of the banks maintained in the previous year, whichever is the lowest.
In terms of the CEOs of banks and finance companies that have not completed three years of establishment should be paid the industrial average remuneration.
NRB felt the need for bringing in separate regulations to determine the salary of CEOs of finance companies and development banks as small financial institutions’ CEOs would only get paid in really low based on the regulation meant for large banks.
“There is a variation among different level of finance companies and development banks as there are some national level ones while some are small with their operation limited in single district, the guidelines will take account of all types of financial institutions and be justifiable for the CEOs,” informed Gyanwali.
Source: THT
The central bank has directed the financial institutions — except class A commercial banks — to determine the remuneration for their CEOs based on the institution’s financial indicators.
Nepal Rastra Bank (NRB) has issued guidelines for class ‘B’, ‘C’ and ‘D’ financial institutions — development bank, finance company and microfinance — regarding the salary for their chief executives. The central bank has asked the financial institutions to fix the salary of CEO based on the financial institutions’ business size, size of lending and deposits, size of operating profit, return on capital among others in the last three years.
Moreover, the financial institutions’ sub-committee formed to manage salary and benefits of the employees can determine the salary of CEO keeping in mind not only the past indicators but also considering the future steps of the financial institution and potential risks while choosing their chief executive.
“The final say in determination of the salary remains with the executive board of financial institutions though the decision also needs to be approved by the central bank,” it said.
It has also tried to reduce the large gap between the salary of CEOs and other junior level staffs asking the financial institutions to determine the salary of each job level justifiably based on the above mentioned financial indicators.
“It will make financial institutions more prudent in fixing the salary to their employees,” said spokesperson for NRB Bhaskar Mani Gyanwali.
The regulations for financial institutions are next in the series of central bank’s attempt at regulating pays and perks of CEOs. The guidelines made public last December had put the cap on the salary and benefits being doled out to the CEOs of class ‘A’ financial institutions causing the huge furore among the highly paid bankers. The central bank argued that it had issued the guidelines to curb the high risk taking tendencies among the CEOs in the view of obtaining added perks and benefits.
The regulation only allowed commercial banks to provide their CEOs fixed annual compensation between pay up to five per cent of total average expense for all employees over the last three years or 0.025 percent of the total assets of the banks maintained in the previous year, whichever is the lowest.
In terms of the CEOs of banks and finance companies that have not completed three years of establishment should be paid the industrial average remuneration.
NRB felt the need for bringing in separate regulations to determine the salary of CEOs of finance companies and development banks as small financial institutions’ CEOs would only get paid in really low based on the regulation meant for large banks.
“There is a variation among different level of finance companies and development banks as there are some national level ones while some are small with their operation limited in single district, the guidelines will take account of all types of financial institutions and be justifiable for the CEOs,” informed Gyanwali.
Source: THT
