News & Updates :11-01-2017

 House passes BAFIA, with two four-year term limits for CEOs, chairmen

The parliament has endorsed the bill to amend and unify bank and financial institution act (BAFIA), imposing two term limit for the chief executive officer, chairman and managing director of a bank or financial institution. The bill endorsed by a full house of parliament on Tuesday will come into effect once it receives the presidential seal. Among other things, the newly-endorsed act has set a term of upto four years for the board directors and CEOs. 

Once the law is enacted, a CEO will not be able to serve for more than two terms, or a total of eight years, in the same bank or financial institution (BFI). However, the chairperson or managing director will face continuous two-term limit, implying that s/he may get back into the same position taking a break after two terms. 

The newly-approved BAFIA has also a provision which allows conversion of promoter shares into public shares after a lock-up period of 10 years, up from seven years earlier proposed in the bill's first draft presented in parliament. 

The bill, which was first tabled by the then finance minister Ram Sharan Mahat in August 2013, had drawn widespread criticism due to the involvement of some lawmakers who also have ownership in bank and financial institutions in the amendment process when the bill was still at the parliament's Finance Committee. 

Some of the provisions proposed by the Ministry of Finance and Nepal Rastra Bank, particularly the measures to strengthen corporate governance in the BFIs, were either removed or changed at the behest of such lawmakers who were in the sub-committee formed by the Finance Committee to finalize the bill.
However, after widespread criticism, the amendment bill tabled for parliamentary approval, was sent to the Finance Committee for a review and reconsideration on June 22 last year.

The bill was approved in the Finance Committee on May 26 after its sub-committee tabled its report at the committee which comprises seven legislators -- including Ichchha Raj Tamang, who is the chairman of Civil Bank Ltd.
However, the full house returned the bill to the committee, instructing it to conduct further discussions and review the provisions -- including those related to share allocations and lock-up period, and the qualification and tenure of bank and financial institutions' (BFIs') officials and directors.
Allocation of 0.5 percent shares of BFIs to their staff, prohibition to microfinance institutions to identify themselves as 'banks', restriction to a person, who has faced action from the regulatory body for professional misconduct, to become board director for up to five years are some of the highlights of the newly approved act. 

Source: My Republica

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