INTERNSHIP REPORT

A STUDY OF ROLE & REGULATORY FRAMEWORK OF BOARD OF DIRECTORS IN CORPORATE GOVERNANCE OF BANKS IN PAKISTAN

RAIMA RAZZAQUE

INTERNSHIP

REPORT

A STUDY OF ROLE & REGULATORY FRAMEWORK OF BOARD OF DIRECTORS IN CORPORATE GOVERNANCE OF BANKS IN PAKISTAN

Supervised by
MR. MEHTAB HUSSAIN SHAH
Assistant Director (BPRD)

MR. WASIM MEMON,

Joint Director (BPRD)

Submitted to

MRS. GULZAR AMIN MERCHANT,

Assistant Director (BPRD)

Submitted by
RAIMA RAZZAQUE
Hailey College of Commerce, University of the Punjab

LETTER OF TRANSMITTAL

August 6th, 2010 MR. MEHTAB HUSSAIN SHAH

Assistant Director (BPRD)

MR. WASIM MEMON,

Joint Director (BPRD)

Banking Policy & Regulations Department, State Bank of Pakistan, Karachi.

Sir, Kindly accept project report on A study of role and regulatory framework of Board of Directors in Corporate Governance of Banks in Pakistan. The report is a thorough analysis of different provisions of corporate governance with respect to board of directors as implemented through regulatory frameworks in different countries. It is hoped that this work exceeds your expectation.

Yours Sincerely,
RAIMA RAZZAQUE

Hailey College of Commerce, University of the Punjab

ACKNOWLEDGEMENT

This effort will stay incomplete if it doesnt mention those hands and shoulders that carried us to this point where we are at the verge of adding something new to the body of knowledge. Sincerest thanks to Mr. Mehtab Hussain Shah, Assistant Director (BPRD) and Mr. Wasim Memon, Joint Director (BPRD) for providing us with the deep insight of the subject matter and for their unconditional guidance throughout the course of our work. Gratitude to Mrs. Gulzar Amin Merchant, Assistant Director (BPRD) for being so kind and genial to us. We are highly thankful to Mr. Muhammad Ali Memon, Deputy Director (T&DD) and State Bank of Pakistan for providing us with excellent opportunity to work for such a prestigious organization and for facilitating our stay here in State Bank of Pakistan.
RAIMA RAZZAQUE

EXECUTIVE SUMMARY
Corporate governance is concerned with the resolution of collective action problems among dispersed investors and the reconciliation of conflicts of interest between various corporate claimholders. Corporate governance is a multi-faceted subject. An important theme of corporate governance is to ensure the accountability of certain individuals in an organization through mechanisms that try to reduce or eliminate the principal-agent problem. In this survey we review the theoretical and empirical research on the main mechanisms of corporate control from the perspective of board of directors, discuss the main legal and regulatory institutions in Pakistan, and examine the comparative corporate governance literature in different countries. Our analysis has yielded various points of fundamental importance. Regulations are only one part of the answer to improved governance. Corporate governance is about how companies are directed and controlled. The balance sheet is an output of manifold structural and strategic decisions across the entire company, from stock options to risk management structures, from the composition of the board of directors to the decentralization of decision-making least in ensuring that board members feel free to engage in open and meaningful debate. Not all board members need to be finance or risk experts, however. The primary task for the board is to understand and approve powers. As a result, the prime responsibility for good governance must lie within the company rather than outside it. Designing and implementing corporate governance structures are important, but instilling the right culture is essential. Senior managers need to set the agenda in this area, not least in ensuring that board members feel free to engage in open and meaningful debate. Not all board members need to be finance or risk experts, however. The primary task for the board is to understand and approve both the risk appetite of a particular company at any particular stage in its evolution and the processes that are in place to monitor risk. Transparency about a companys governance policies is critical. As long as investors and shareholders are given clear and accessible information about these policies, the market can be allowed to do the rest, assigning an appropriate risk premium to companies that have too few independent directors or an overly aggressive compensation policy, or cutting the costs of capital for companies that adhere to conservative accounting policies. State bank of Pakistan is responsible for regulation and supervision of the financial system of Pakistan. SBP has one full fledged department named Banking Policy and Regulation Department for providing basic regulatory framework for efficient supervision and monitoring of the banks and DFIs. In comparison with other countries, we found regulatory framework for corporate governance in Pakistan to be much sounder, stable and better. However, certain areas still need improvement.

CONTENTS

CORPORATE GOVERNANCE 1.1 Significance of Corporate Governance CORPORATE GOVERNANCE FOR BANKS 2.1. Safety of Depositors Money 2.2 Risk Management 2.3 Stability of Financial System 2.4 Transparency & Fairness 2.5 Credibility & Confidence 2.6 Requirements of Developing Economy 2.7 Bank & Economy Failure 2.8 Performance Improvement CORPORATE GOVERNANCE IN PAKISTAN 3.1 Role of SBP in Corporate Governance 3.2 Regulatory Framework for Corporate Governance 3.3 Scope of Corporate Governance BOARD OF DIRECTORS 4.1 Definition 4.2 Roles & Responsibilities 4.3 Risks associated with Board of Directors 4.3.1. Risk to depositors money 4.3.2. Unlawful stock market activity 4.3.3. Monopolization 4.3.4. Unfit persons on the board 4.3.5. Business strategies and policies 4.3.6. Management Control 4.3.7. Risk to the health of financial sector 4.4 Risk Mitigation measures by SBP COMPARATIVE ANALYSIS OF CORPORATE GOVERNANCE 5.1 Responsibilities of the Board of Directors 5.2 Board Composition 5.3 Nominating Committee 5.4 Board Performance Evaluation 5.5 Remuneration of Directors 5.6 Board Qualifications 5.7 Meetings of Board 5.8 Pros & Cons 5.8.1. Balanced Board Composition 5.8.2. Restricted number of family members to be on Board 5.8.3. Supervision of Strategic Shareholders 5.8.4. Curbing the power of sponsor directors 5.8.5. Restricted Capacity of Key Executives 5.8.6. Maintenance of Secrecy 5.8.1. Absence of Nominating Committee 5.8.2. Few Independent Director 5.8.3. No Control on Conflict of Interest 5.8.4. Political Influence on Board 5.8.5. Mandatory Attendance requirement for Board Meetings 5.8.6. No specific criteria for Board Performance Evaluation 5.8.7. Depositors representation in the Board

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5.8.8. Minor Shareholders Nominee 5.8.9. Minimum Qualification of Board Members RECOMMENDATIONS 6.1 Incentives for sound corporate governance 6.2 Liaison and Harmony between regulatory authorities 6.3 Independent Directors 6.4 Performance Evaluation 6.5 Frequency of meetings 6.6 Performance-based remuneration 6.7 Depositors representation in board 6.8 Formation of nominating committee 6.9 Regular review & Update of corporate governance framework 6.10Attendance requirement for board meetings 6.11Qualification of Board Members CONCLUSION REFERENCES

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Corporate Governance implies systems through which business corporations are directed, managed and controlled by regulatory authorities. The corporate governance structure define the division of rights and duties among different organizational players, such as the board of directors, executives, managers, shareholders and other stakeholders, and sets out the rules and procedures for decision making regarding corporate affairs. In the broadest sense, corporate governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as possible the interests of individuals, corporations and society.

CORPORATE GOVERNANCE
Corporate Governance refers to the processes, structures, systems and information used for directing and overseeing the management of an institution or an organization. Corporate governance is the relationship between managers, directors and shareholders. Broadly stated, corporate governance encompasses the combination of laws, regulations, rules and practices that enable the corporation to attract capital, perform efficiently, generate profit and meet both legal obligations as well as the expectations of society generally. Basically corporate governance refers to the means by which a corporation assures investors that it has in place well performing management who ensure that corporate assets provided by investors are being put to appropriate and profitable use.

DEFINITION

A set of relationships between a companys management, its board, its shareholders, and other stakeholders. Corporate governance also provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined. Good corporate governance should provide proper incentives for the board and management to pursue objectives that are in the interests of the company and shareholders and should facilitate effective monitoring, thereby encouraging firms to use resources more efficiently.
OECD, 1999

1.1. Significance of Corporate Governance

Good corporate governance helps to prevent corporate scandals, fraud, and potential civil and criminal liability of the organization. It is also good business. A good corporate governance image enhances the reputation of the organization and makes it more attractive to customers, investors, suppliers and, in the case of nonprofit organizations, contributors. The proper governance of companies is as crucial to the world economy as the proper governance of countries. Good corporate governance can improve standards in business, encourage foreign investment, and lead to improved performance by companies. In an open financial market, investors choose from a variety of investment vehicles. The existence of a corporate governance system is likely a part of this decision-making process. In such a scenario, companies that are more open and transparent, and thus well governed, are more likely to raise capital successfully because investors will have the information and confidence necessary for them to lend funds directly to such companies. Moreover, wellgoverned companies likely will obtain capital more cheaply than
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GOOD CORPORATE GOVERNANCE PRACTICES ENSURE:

Adequate disclosures and effective decision making to achieve corporate objectives; Transparency in business transactions; Statutory and legal compliances; Protection of shareholder interests; Commitment to values and ethical conduct of business. Long-term survival of the companies.

companies that have poor corporate governance practices because investors will require a smaller risk premium for investing in wellgoverned companies. Thus, in an efficient capital market, investors will invest in companies with better corporate governance frameworks because of the lower risks and the likelihood of higher returns. Good corporate governance practices also enable Management to allocate resources more efficiently, which increases the likelihood that investors will obtain a higher rate of return on their investment. Corporate governance in a developing country setting takes on additional importance. Good corporate governance is vital because of its role in attracting foreign investment. The extent of foreign investment, in turn, shapes the prospects for economic growth for many developing countries. Generally developing countries that have good corporate governance structures consistently outperform developing countries with poor corporate governance structures. Moreover, corporate governance can play a role in reducing corruption, and decreased corruption significantly enhances a countrys development prospects. Ultimately, the concept of corporate governance is a vital consideration to be enforced successfully.

CORPORATE GOVERNANCE FOR BANKS

Banks are critical elements in any economy and the need for good corporate governance in banks cannot be undermined for a number of important reasons:
2.1. Safety of Depositors Money

The money that banks take is predominantly the deposits from the general public that makes the business of banks highly leveraged and renders banks answerable to the depositors. Most of the depositors do not possess sufficient knowledge of financial products but still entrust their savings with the banks. Only 8% of the total funds available to the bank are contributed by the sponsors whereas rest of the overwhelming 92% funds comes from depositors. Banks advance depositors money and bad debts incurred by the banks could lead to pecuniary loss for the depositors with adverse outcomes for the economy as a whole. The interest of depositors must have to be protected and therefore banks need sound corporate governance framework and practices.
2.2 Risk Management

Banks often undertake transactions and ventures that a involve variety of significant risks and, among other things, good corporate governance will enable banks to function without undue risk exposures and give rise to a healthy financial system. Besides, less of a bank and more of public at stakes, a bank may be enticed into venturing in risky business prospects which is likely to put depositors
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money at risk. To curtail such tendencies, a sound corporate governance framework is required.
2.3 Stability of Financial System

Good corporate governance for banks is important in ensuring solvency and stability of the financial system since banks exhibit good governance direct their resources more efficiently and prudently.
2.4 Transparency & Fairness

The banking sector exhibits varied ownership structure comprising of foreign, family-owned and some state-owned banks which offers many challenges regarding corporate governance. This scenario calls for transparency and fairness in lending and investment decisions of banks, particularly regarding group companies and only such a framework as promoting sound corporate governance can ensure transparency and fairness.
2.5 Credibility & Confidence

There is a need for Banks to follow practices of good governance practices and achieve standards of customer to build public confidence in credibility of their operations. Since banks function in a highly vulnerable setting, any genuine or perceived belief of wrongdoings in a banks transactions could spark a deposits run.
2.6 Requirements of Developing Economy

Banks in developing economies have resulted in more grave economic consequences than in developing economies and therefore corporate governance is necessary to ensure that banks act prudently and contribute positively in the economy.
2.7 Bank & Economy Failure

WHY CORPORATE GOVERNANCE FOR BANKS

In the absence of a sound corporate governance framework, banks tend to undertake risky ventures, and in addition, banks can often elude outcomes of wrong action for a considerable period due to safety nets afforded by the government. Poor corporate governance of banks in such scenarios may heighten the possibility of bank failure. Furthermore, in developing economies like Pakistan, failure of one bank is likely to impact the entire banking industry and ultimately the economy.
2.8 Performance Improvement

Corporate governance is required for banks for several important reasons, such as:
Safety of Depositors Money Effective Risk Management Stability of Financial System Transparency & Fairness Credibility & Confidence Requirements of Developing Economy To prevent Bank & Economy Failure Performance Improvement

Good corporate governance affords heightened performance, enhanced governance systems that assist in better decision making and enable succession planning for senior management subsequently bettering the long run progress of companies and economy in the long run. The need to implement sound corporate governance in banks in developing economies becomes even more important due to the absence of deposit insurance and a relatively less experienced and less disciplined bank management. In order to provide a safety net to the
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depositors and the banking industry, organizations such as the Basel Committee and IMF have emphasized the need to establish some minimum regulatory norms and a code of corporate governance.

CORPORATE GOVERNANCE IN PAKISTAN

3.1 Role of SBP in Corporate Governance

State Bank of Pakistan is the leading proponent of good corporate governance in Pakistan being the regulator and supervisor of banks and DFIs. The role of SBP is fundamental in guiding regulatory framework of corporate governance in the banking sector. SBP has developed and applied an intensive corporate governance plan for banks backed by strong regulatory framework, oversight and banking reforms particularly those concerning restructuring of banking sector. It is through these noteworthy efforts of SBP that Pakistan was ranked first by the World Bank in the areas of Corporate Governance in 2009. The main focus of developing regulatory framework is to beef up the operations of the board of directors of banks. The efforts of SBP concerning corporate governance of banks in Pakistan has been substantiated in various circulars and guidelines issued by the central bank to provide regulatory framework for sound corporate governance. Besides, SBP published a Handbook on Corporate Governance and developed Prudential Regulations for corporate governance as to ensure good governance in banks. SBP has undertaken considerable efforts to chalk out the responsibilities of the board of directors that are policy making and setting general direction, oversight of the business as well as the key executives. The directors are responsible for holding regular meetings, establishing board committees for audit, risk management, recruitment and compensation, and undertake appropriate training to assist them in performance of their functions as directors. SBP has segregated the positions of chairman and CEO of banks and rendered it compulsory to have at least 25% independent directors on the Board and not more than two executive directors. SBP also has solid fit and proper test for the appointment of directors and CEO of banks which banks must also comply for the appointment of key executives. Besides, SBP has drafted and published guidelines concerning risk management, internal audit, IT security and business continuity planning, having realized the importance of risk management in corporate governance. Prudential regulations cover risk management that checks exposure of banks to borrowers, whether group companies, sectors or single borrower and also limit investment of banks in equity market.
3.2 Regulatory Framework for Corporate Governance

The role and importance of banks in the financial system and the way banks are funded underscores the need for a framework for
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regulation of corporate governance for banks. The legislative framework for banks recognizes this crucial role and the risk of malfeasance, among other things, by:
i. Restricting access to the industry; ii. Defining grounds for revoking a license, including where the conduct of business is detrimental to the public interest or the interest of depositors; iii. Defining types of individuals who cannot serve as directors or officers of a licensee; iv. Imposing large exposure restrictions on lending and investment; and v. Requiring regular reporting to the Bank, annual audits by independent auditors and public disclosure of financial performance.

In Pakistan, banks are subject to numerous prudential regulations since corporate governance of banks cannot be discussed without considering the banking regulations with which banks have to comply. Securing (i) appropriate governance of supervisory institutions (regulatory governance), and (ii) efficient regulation, is extremely important to ensure sound corporate governance of banks in general and regulatory framework for corporate governance in Pakistan ensures both.
Exhibit 1: Legal & Regulatory framework in Pakistan concerning corporate governance.

LAWS AND REGULATIONS

State Bank Act, 1956 Banking Companies Ordinance, 1962 Companies Ordinance, 1984 Prudential Regulations Circulars and Guidelines

SECTIONS
Section 37A, 37B. Sections 15, 15A, 15B, 15C, 41A, 41B, 41D, 66, 68, 70. Section 174 to 197A, 198 to 204A Regulation G-1 to G-4 Circulars issued by SBP concerning corporate governance have been compiled in Handbook of Corporate Governance published by SBP. Published by SECP in 2002 while exercising its powers under Section 34(4) of the Securities and Exchange Ordinance, 1969, Covers legal requirements for bank nationalization. BASEL Committee on Banking Supervision. The latest June, 2010 draft of Principles for enhancing corporate governance.

Manual of Corporate Governance

Banks Nationalization Act, 1974 International Best practices

3.3

Scope of Corporate Governance

The purview of regulatory framework of State Bank of Pakistan for corporate governance comprises of locally incorporated commercial banks, foreign banks, Islamic banks, microfinance banks, development financial institutions. A detailed list of these institutions is annexed herewith (Annexure 1). Moreover, regulatory framework for corporate governance covers sponsors, board of directors and key executives of banks
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(Exhibit 2). The focus of this study is Board of Directors of banks and therefore regulatory framework concerning BODs only will be emphasized upon.
Exhibit 2: Definitions of key terminologies covered in Corporate Governance.

TERMINOLOGY
Sponsors

DEFINITIONS
Sponsors/Sponsor Shareholders : All those shareholders of a bank holding sponsor shares. Sponsor Shareholder also means an individual, company or any other person whose shares are held in safe custody with SBP or in a blocked account maintained with Central Depository Company of Pakistan Limited. Board of directors comprise of directors, defined by SBP Prudential Regulations as any person occupying the position of a director on the Board of a bank/DFI and includes sponsor, nominee and alternate director or by whatever name called. Sponsor Directors Members of the Board of Directors of a bank holding sponsor shares will be considered Sponsor Directors. Executive Director A paid employee or executive in the concerned bank / DFI or employee or executive in a company / group where sponsor shareholders of the bank / DFI have substantial interest. Independent Director Such a person who is not linked directly or indirectly with bank / DFI or its sponsor or strategic shareholders.

Board of Directors

Executives

Chief Executive Officer (CEO) An individual who, subject to the control and directions of the directors, is entrusted with the whole, or substantially the whole, of the powers of management of the affairs of the bank/DFI occupying the position of Chief Executive Officer and include President, acting President, Managing Director, Country Head of Foreign bank, Executive assuming charge of the bank for interim period or by whatever name called, and whether under a contract of service or otherwise. Key Executives Key executives of banks/DFIs including any executive, acting as second to CEO including Chief Operating Officer, Deputy Managing Director or by whatever name called; Chief Financial Officer / Head of Finance / Head of Accounts; Head of Internal Audit; Country Treasurer; Head of Credit/ Risk Management; Head of Operations; Head of Compliance; Head of Human Resource; Head of Information Technology; Head of Islamic Banking.

BOARD OF DIRECTORS
4.1 Definition

The definition of board of directors and different types of directors is mentioned in exhibit 2. The provisions for each type of director can be found in detail in Handbook of Corporate Governance published by SBP.
4.2 Roles & Responsibilities

A succinct illustration of roles and responsibilities of The Board of Directors is given below, as taken from the Prudential Regulations of SBP (G-2):
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The Board of Directors shall assume its role independent of the influence of the Management and should know its responsibilities and powers in clear terms. It should be ensured that the Board of Directors focus on policy making and general direction, oversight and supervision of the affairs and business of the bank / DFI and does not play any role in the day-to-day operations, as that is the role of the Management. The Board shall approve and monitor the objectives, strategies and overall business plans of the institution and shall oversee that the affairs of the institution are carried out prudently within the framework of existing laws & regulations and high business ethics. All the members of the Board should undertake and fulfill their duties & responsibilities keeping in view their legal obligations under all the applicable laws and regulations. All Board members should preferably attend at least 1-2 weeks training program(s) which will enable them to play effective role as a director of bank/DFI, at an institution like Pakistan Institute of Corporate Governance or other similar institution within first year of their directorship on the Board of bank/DFI The Board shall clearly define the authorities and key responsibilities of both the Directors and the Senior Management without delegating its policy-making powers to the Management and shall ensure that the Management is in the hands of qualified personnel. The Board shall approve and ensure implementation of policies, including but not limited to, in areas of Risk Management, Credit, Treasury & Investment, Internal Control System and Audit, IT Security, Human Resource, Expenditure, Accounting & Disclosure, and any other operational area which the Board and/or the Management may deem appropriate from time to time. The Board shall also be responsible to review and update existing policies periodically and whenever circumstances justify. As regards Internal Audit or Internal Control, a separate department shall be created which shall be manned preferably by professionals responsible to conduct audit of the banks/DFIs various Divisions, Offices, Units, Branches etc. in accordance with the guidelines of the Audit Manual duly approved by the Broad of Directors. The Head of this department will report directly to the Board of Directors or Board Committee on Internal Audit. The business conditions and markets are ever changing and so are their requirements. The Board, therefore, is required to ensure existence of an effective Management Information System to remain fully informed of the activities, operating performance and financial condition of the institution, the environment in which it operates, the various risks it is exposed to and to evaluate performance of the Management at regular intervals. The Board should meet frequently (preferably on monthly basis, but in any event, not less than once every quarter) and the individual directors of an institution should attend at least half of the meetings
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held in a financial year. The Board should ensure that it receives sufficient information from Management on the agenda items well in advance of each meeting to enable it to effectively participate in and contribute to each meeting. Any advisor, if appointed by the Board member, shall neither attend the Board meeting(s) on behalf of the Board member nor shall regularly sit in the Board meeting(s) as an observer or any other capacity. The Board should carry out its responsibilities in such a way that the external auditors and supervisors can see and form judgment on the quality of Boards work and its contributions through proper and detailed minutes of the deliberations held and decisions taken during the Board meetings.
4.3 Risks associated with Board of Directors

The need to regulate corporate governance in banks is welldocumented above. Since, the focus of this study is Board of Directors of banks, there are number of risks that might arise if board of directors of a bank is not regulated.

4.3.1. Risk to depositors money

Since board of directors have only meager contribution in banks capital and most of the profit-bearing investments and lending undertaken by the bank is with depositors money. With this little stake, Board of Directors may be inclined to invest the money in risky ventures in pursuit of higher returns. This inclination can result is serious consequences for the bank and financial sector as a whole. Above all, the trust of public in the banks may decline tremendously and the entire economy could feel the tremors.

4.3.2. Unlawful stock market activity

Sponsor directors can indulge themselves in unlawful activities in the security markets by trading the sponsor shares among the acquaintances at higher prices and buying them back in continuous cycles. This could give rise to false appreciation of the share price of the bank and entice the public and investors to invest in the bank.

4.3.3. Monopolization
If a family has established a bank and holds all the paid-up capital of the bank, it is likely to put its family members in the Board of Directors giving rise to monopoly at the top. This scenario can severely hamper the vision and goal setting of the organization as well as decision making at the top level since the board of directors will only take those decisions which will enhance the financial health of the family as a whole and there will be no opposition to their decision making. It can lead to unlawful usage of depositors money and may cause the bank to sink. There is also a possibility that a single family has major shareholding and thus board representation in more than one bank, this situation also gives rise to monopoly and may elicit poor corporate governance and decision making, ultimately hurting the confidence of the public and the health of overall economy.4
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4.3.4. Unfit persons on the board

Individuals on the board of directors of the bank may undertake risky ventures and collateralize sponsor shares. The inability to fulfill the obligations will then allow any person holding the sponsor shares to become a member of board of directors, irrespective of whether he is fit and proper and is a person of integrity and honest. This scenario can allow ineligible and immoral persons to become a director and affect the decision making of the bank.

4.3.5. Business strategies and policies

The board of directors is responsible for the designing and overseeing the implementation of the business policies and risk strategies of the bank. They are also responsible for the oversight of senior management. Board of directors has duty of care and loyalty therefore, if board of directors constitutes members who are unfit and improper for the job and are immoral and squalid, every policy that might come out from such a board is likely to be self-centered and poor. Implementation of such policies and strategies can greatly enhance the risk to the bank.

4.3.6. Management Control

Board of directors is responsible for the oversight of senior management and sees that the bank practices are in line with the banks vision and legal requirements. If board of directors constitute sordid persons, it is highly unlikely that they will be able to control the management and ensure that the bank is operating according to the requirement s of law and exhibiting sound practices. Besides, the squalor may well percolate down the organizational structure and render executives and management inefficient and ineffective with little concern for the depositors money.

4.3.7. Risk to the health of financial sector

Poor corporate governance can lead to the bank failure and shake the trust and confidence of the public in the banking sector. This combined with the fact that bank failures are rather contagious may result in the failure of entire financial sector. Ultimately, the economy could wane.
4.4 Risk Mitigation measures by SBP

In order to mitigate the risks brought forth by the board of directors, SBP has taken various measures detailed under PRs and other laws and ordinances: i. ii. iii. Instructions issued by SBP (PRs & Circulars) Submission of regulatory returns to SBP Due Diligence process

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COMPARATIVE ANALYSIS OF CORPORATE GOVERNANCE

This section compares the regulations of corporate governance of Pakistan with different countries from the perspective of board of directors. We have compared these regulations with United Kingdom, Malaysia, Singapore, Bangladesh and Brazil. In addition to these countries we have also compared our regulations with that of standards given by the BASEL Committee on Banking Supervision. Comparison with the developing countries i-e., Bangladesh and with the developed countries i-e., United Kingdom, makes a true reflection for Pakistan that where it is and where it should be. In our research, we came across the following points of differences.
5.1 PAKISTAN Responsibilities of the Board of Directors

The Board of Directors shall assume its role independent of the influence of the Management and should know its responsibilities and powers in clear terms. It should be ensured that the Board of Directors focus on policy making and general direction, oversight and supervision of the affairs and business of the bank / DFI and does not play any role in the day-to-day operations, as that is the role of the Management.

MALAYSIA SINGAPORE BANGLADESH BASEL

FSA-UK

The boards role is to provide entrepreneurial leadership of the company within a framework of prudent and effective controls which enables risk to be assessed and managed. The board should set the companys strategic aims, ensure that the necessary financial and human resources are in place for the company to meet its objectives and review management performance. The board should set the companys values and standards and ensure that its obligations to its shareholders and others are understood and met. All directors must take decisions objectively in the interests of the company.

The Board shall (a) Be responsible for the general administration of the affairs and business of the Bank and the approval of the budget and operating plan of the Bank; (b) Have oversight of the management of the Bank and keep under constant review the performance of the Bank in giving effect to its objects, carrying out its functions and the use of the resources of the Bank; and (c) Be responsible for such other matters as provided under this Act.

The Board is chiefly responsible for setting corporate strategy, reviewing managerial performance and maximizing returns for shareholders at an acceptable level of risk, while preventing conflicts of interest and balancing competing demands on the bank.

The role of Board is (a) Work-planning and strategic management, (b) Lending and risk management, (c) Internal control management, (d) Human resources management and development, (e) Financial management and Formation of supporting committees.

The board has overall responsibility for the bank, including approving and overseeing the implementation of the banks strategic objectives, risk strategy, corporate governance and corporate values. The board is also responsible for providing oversight of senior management. The board has ultimate responsibility for the banks business, risk strategy and financial soundness, as well as for how the bank organizes and governs itself.

5.2 PAKISTAN

Board Composition

The board should consist of executive, non-executive and independent directors. Ther should seven members on the board at the minimum. And minimum 25% of the board should be independent directors. Maximum two members of the board (including CEO) will be executive directors. Not more than 50% of the board executive or sponsor directors.

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The board should include a balance of executive and non-executive directors (and in particular independent non-executive directors) such that no individual or small group of individuals can dominate the boards decision taking. Except for smaller companies7, at least half the board, excluding the chairman, should comprise non-executive directors determined by the board to be independent. A smaller company should have at least two independent non-executive directors.

FSA-UK MALAYSIA SINGAPORE BANGLADESH BRAZIL BASEL

The board should appoint one of the independent non-executive directors to be the senior independent director. The senior independent director should be available to shareholders if they have concerns which contact through the normal channels of chairman, chief executive or finance director has failed to resolve or for which such contact is inappropriate. There should not more than one executive director, preferably it should be the CEO. At least one-third of their board members are independent directors. There should be clear separation between the roles of CEO and Chairman. The Board shall consist of (a) The Governor; (b) Not more than three Deputy Governors; and (c) Not less than five but not more than eight directors appointed under subsection 16(1). The board should comprise directors who as a group provide core competencies such as accounting or finance, business or management experience, industry knowledge. There should be strong and independent element on the board making up at least one-third of the board.

The board of directors of the banking companies shall be constituted of maximum 13 directors. However directors of the banks , where the number of directors is more than this number, shall be allowed to complete their present tenure of office.

The number of members that constitute the board of directors should be between 5 and 9, depending on the profile of the company. If the Chairperson and CEO positions cannot be seperated and are held by the same person, it is recommended that the board appoints another key leader.

The bank should have an adequate number and appropriate composition of board members. Unless required otherwise by law, the board should identify and nominate candidates and ensure appropriate succession planning. Board perspective and ability to exercise objective judgment independent17 of both the views of executives and of inappropriate political or personal interests can be enhanced by recruiting members from a sufficiently broad population of candidates. Independence can be enhanced by including a sufficient number of qualified non-executive members on the board who are capable of exercising sound objective judgment. Where a supervisory board or board of auditors is formally separate from a management board, objectivity and independence still needs to be assured by appropriate selection of board members.

5.3

Nominating Committee

PAKISTAN MALAYSIA SINGAPORE FSA-UK

There is no specific committee for the appointment of the directors and CEO. Board is responsible for taking the decisions.

There should be a nomination committee which should lead the process for board appointments and make recommendations to the board. A majority of members of the nomination committee should be independent non-executive directors. The chairman or an independent non-executive director should chair the committee, but the chairman should not chair the nomination committee when it is dealing with the appointment of a successor to the chairmanship. The nomination committee should make available8 its terms of reference, explaining its role and the authority delegated to it by the board.

The nominating committee shall comprise of a minimum of five members, of which 4 at least non-executive directors. The company should be chaired by an independent director. The committee is also responsible for establishing minimum requirements for the CEO. The requirements and criteria should be approved by the board, and NC also overseeing the appointment, management succession planning and performance evaluation of key senior management officers. Companies should establish a nominating committee(NC) to make recommendations to the board on all board appointments. The NC shoud comprise at least three directors, a majority of whom including the chairman, should be independent. The NC should have written terms of reference that describe the written terms of reference that describe the responsibilities of its members. In addition, NC should indicate which directors are executive, non-executive. The NC should satisfy itself that each nominee is fit and proper, and is qualified for the office.

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BANGLADESH BRAZIL BASEL

There shall be no committee or sub-committee of the board other than the executive committee and the audit committee.

There shall be no such committee.

There is a nomination committee for the appointment of board which provides recommendations to the board for new board members and members of senior management; may be involved in assessment of board and senior management effectiveness; may be involved in overseeing the banks personnel or human resource policies.

5.4

Board Performance Evaluation

PAKISTAN MALAYSIA SINGAPORE BANGLADESH BRAZIL BASEL FSA-UK

There is no particular criterion for evaluating the board performance.

The board should undertake a formal and rigorous annual evaluation of its own performance and that of its committees and individual directors.

There should be a procedure for a regular assessment of the board as a whole as well as the performance of each individual director and the CEO to ensure their effectiveness. Therefore, the board should implement a process through the Nominating Committee, for an annual assessment of the effectiveness of the board as a whole.

There should be a formal assessment of the effectiveness of the Board as a whole and the contribution by each director to the effectiveness of the Board. The nominating committee(NC) should decide how the boards performance may be evaluated and propose performance objective criteria. Such performance criteria should be approved by the board. The performance evaluation should also consider the companys share price performance overa five-year period.

The board is responsible for evaluating the performance of the directors.

The chairperson is responsible for assessing the performance of the directors particularly with regard to attendance and active participation in meetings.

The board should structure itself in a way, including in terms of size, frequency of meetings and the use of committees, so as to promote efficiency, sufficiently deep review of matters, and robust, critical challenge and discussion of issues. To support board performance, it is a good practice for the board to carry out regular assessments of both the board as a whole and of individual board members.

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5.5

Remuneration of Directors

PAKISTAN FSA-UK MALAYSIA SINGAPORE BANGLADESH BRAZIL BASEL

The banks/DFIs during a calendar year may pay a reasonable and appropriate remuneration for attending the Board or its committee (ies) meeting(s), to their non-executive directors and chairman. However, the remuneration to be paid shall be linked to the actual number of Board or committee meetings attended by an individual director / chairman i.e. no fixed remuneration on periodical basis (monthly or yearly etc.) shall be paid to the non-executive directors. Furthermore, the scale of remuneration to be paid to the non-executive directors and chairman for attending the Board and / or committee meetings shall be approved by the shareholders on a pre or post facto basis in the Annual General Meeting. However, no such remuneration shall be paid to the executive directors, except usual TA/DA as per banks/ DFIs standard rules and regulations. Banks/DFIs shall also ensure that except as mentioned above, no additional payment or perquisites will be paid to the non-executive directors and chairman. Furthermore, no consultancy or allied will be awarded to the non-executive directors or to the firms / institutions/ companies etc. in which they hold substantial interest. Levels of remuneration should be sufficient to attract, retain and motivate directors of the quality required to run the company successfully, but a company should avoid paying more than is necessary for this purpose. A significant proportion of executive directors remuneration should be structured so as to link rewards to corporate and individual performance. The remuneration committee should judge where to position their company relative to other companies. But they should use such comparisons with caution, in view of the risk of an upward ratchet of remuneration levels with no corresponding improvement in performance. They should also be sensitive to pay and employment conditions elsewhere in the group, especially when determining annual salary increases. No director should be involved in deciding his or her own remuneration.

There should be a formal and transparent procedure for fixing the remuneration packages of board members, CEO and senior management and the remuneration policies and practices should be in line with the Banks ethical values, objectives and culture The policy on the remuneration of directors, CEO and senior management should be developed under conditions of objectivity and transparency. The levels of remuneration should be sufficient to attract and retain directors of caliber, but at the same time, should also be balanced against the need to ensure that the Banks funds are not used to subsidize excessive remuneration packages. The remuneration of non-executive directors should be appropriate to the level of contribution, taking into account factors such as effort and time spent, and responsibilities of the directors. In addition, the remuneration of each board member may differ based on their level of expertise, knowledge and experience; The level of remuneration should be appropriate to attract, retain and motivate the directors needed to run the company successfully but companies should avoid paying more than is necessary for this purpose. The performance-related elements of remuneration should be designed to align interests of executive directors with those of shareholders and link rewards to corporate and individual performance. There should be appropriate and meaningful measures for the purpose of assessing executive directors performance. The remuneration of non-executive directors should be appropriate to the level of contribution, taking into account factors such as effort and time spent, and responsibilities of the directors. Non-executive directors should not be over-compensated to the extent that their independence may be compromised. In fixing salary and allowances of the chief executive of a bank, financial condition, area of operation, business volume and earning capacity of the bank, qualifications, age and experience of the person concerned and remuneration paid to the persons occupying same position in the peer banks shall have to be taken into consideration. Total salary shall be comprised of direct salary covering Basic Pay and House Rent and allowances as Others head should be specified in amount/ceiling. Terms of salary allowances and other facilities as specified in terms and conditions of appointment cannot be changed during the tenure. In case of renewal, proposal may be made for re-fixation of the salary considering the job performance of the incumbent Chief Executive. Directors should be paid for their work and this compensation should be established by the owners. Director compensation should Adequately reflect time, effort , and experience dedicated to their functions; Provide an adequate incentive to align the interests of the executive directors to those of the owners; and Not compromise the ability of the directors to use his/her own judgment in serving the best interests of the organization and its owners.

No provision for remuneration of directors.

5.6 PAKISTAN

Board Qualifications

Minimum qualification for a person to be appointed as Director on the Board of a bank/DFI is graduation. Higher education accomplished in the discipline of banking and finance may be an added qualification. Must have management/business experience of at least 5 years at senior level in an active capacity. In case of lawyers, 7 years experience is required, provided that they are not practicing/involved with or acting as legal counsel/adviser or on payroll of a bank where he is proposed to be appointed as director.

No provision regarding the board qualifications.

FSA-UK

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SINGAPORE BANGLADESH BRAZIL BASEL

MALAYSIA

To ensure that the board has the required mix of skills and experience to discharge its duties, members of the board should be from diverse backgrounds, with knowledge and experience in different pertinent disciplines which may include finance, accounting, legal, business management, information technology and investment management. Members of the board should also have certain level of academic qualifications and/or experience at managerial level. Shareholders of a Bank should strive to appoint board members with strategic thinking and leadership skills who are dynamic and responsive to the business environment. No provision regarding the board qualifications.

The board should possess appropriate experience, competencies and personal qualities, including professionalism and personal integrity. The board collectively should have adequate knowledge and experience relevant to each of the material financial activities the bank intends to pursue in order to enable effective governance and oversight.

No provision regarding the board qualifications.

The board should possess, both as individual board members and collectively, appropriate experience, competencies and personal qualities, including professionalism and personal integrity. The board collectively should have adequate knowledge and experience relevant to each of the material financial activities the bank intends to pursue in order to enable effective governance and oversight. Examples of areas where the board should seek to have, or have access to, appropriate experience or expertise include finance, accounting, strategic planning, communications, governance, risk management, bank regulation, auditing and compliance.

5.7

Meetings of Board

PAKISTAN FSA-UK MALAYSIA SINGAPORE BANGLADESH

The Board should meet frequently (preferably on monthly basis, but in any event not less than every quarter) and the individual directors of an institution should attend at least half of the meetings held in a financial year. It has now been decided that banks incorporated in Pakistan having foreign participation/equity can hold board meetings abroad in following manner in a calendar year. Banks having more than 51% foreign shareholding should have maximum of 4 Board meetings. Banks having more than 40% but less than 51% foreign shareholding should have 3 Board meetings where Banks having more than 30% but less than 41% foreign shareholding should hold 1 Board meeting and banks with less than 30 % foreign shareholding are not required to hold any meeting. The board should meet sufficiently regularly to discharge its duties effectively. There should be a formal schedule of matters specifically reserved for its decision. The chairman should hold meetings with the non-executive directors without the executives present. Led by the senior independent director, the non-executive directors should meet without the chairman present at least annually to appraise the chairmans performance and on such other occasions as are deemed appropriate. The board should use the AGM to communicate with investors and to encourage their participation.

The Board may meet as often as necessary, but not less than once in each month. The chairman or any other director may, at any time, call a meeting of the Board. The person calling a meeting shall ensure that (a) each director is given at least three days notice of the meeting; or (b) if the meeting is to be convened as a matter of urgency, the directors agree to waive the requirement under paragraph (a). At any meeting of the Board, the quorum shall be five directors, and decisions shall be adopted by a simple majority of the votes of the directors present and voting: Provided that in the case of an equality of votes, the chairman shall have a casting vote. Individual directors should attend at least 75% of the board meetings held in each financial year. The Board is responsible for board meetings

The Board of directors should decide about all the meetings.

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BRAZIL BASEL

Frequency of Board meetings should be determined by each companys needs. They should be held often enough to ensure the effectiveness of Board work, but not exceed one per month, to avoid undue inference in the operation of Management.

No provision concerning the board meetings, frequency of board meetings, mandatory attendance for board meetings and so on.

A birds eye view of comparative analysis of regulatory frameworks and relevant provisions for corporate governance with respect to Board of Directors is provided in Exhibit 3.

5.8

Pros & Cons

From the above comparative analysis of corporate governance of aforesaid countries, following positive and negative aspects of regulatory frameworks for corporate governance of banks in Pakistan:
PROS

5.8.1. Balanced Board Composition

The board consists of executive directors, non-executive directors and independent directors. Moreover, maximum two members can be executive director, one of which is CEO.

5.8.2. Restricted number of family members to be on Board

Not more than 25% directors of the same family are permitted to be on the board of a bank/ DFI. Thus, malpractices and fraudulent concerns can be checked.

5.8.3. Supervision of Strategic Shareholders

Any strategic investor pertaining to acquire controlling stake should seek prior approval from SBP either directly or through the concerned ministry. Other countries do not have guidelines regarding strategic dealings.

5.8.4. Curbing the power of sponsor directors

Throughout the discussion above, it should be evident that directors of bank holding shares of the same bank can misuse them in securities market in addition to other risks. SBP requires sponsor directors to surrender their shares to CDC in a blocked account so that these shares couldnt be traded.

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Exhibit 3: Comparative analysis of provisions of corporate governance with respect to board of directors in different countries.

COUNTRIES AND COMMITTEES

PRINCIPLES
1.RESPONSIBILITIES OF BOARD OF DIRECTORS
Approve overall business strategy Approve and oversee the implementation of risk strategy Duty of care1 Duty of loyalty2 Risk assessment of transactions Oversight of senior management Selection and replacement of senior management Monitor senior managements actions Regular meetings with senior management Set formal performance standards Setting out organizational structure and line of authority Regular revision of policies, process and controls with senior management Human resource management and development Formation of supporting committees Financial management Delegate authorities of policy making to senior management

BASEL

FSA

SINGAPORE

MALAYSIA BANGLADESH

BRAZIL

PAKISTAN

2. BOARD COMPOSITION (EXECUTIVE. NON-EXECUTIVE, INDEPENDENT DIRECTORS)

Minimum no. of members that constitute board No. of Executive Directors No. of Non-Executive Directors No. of Independent Directors 13 = Non-executive = Executive 50% 1 1/3 of Board 1/3 of Board B/W 5 & 9 7 50% 2 25%

3.BOARD PERFORMANCE AND EVALUATION

Self-assessment Evaluation by Committee Evaluation by chairperson

4.REMUNERATION OF DIRECTORS
Involvement of directors in deciding remuneration Fair remuneration for all directors Objectivity and transparency Fixed remuneration

5.BOARD QUALIFICATION
Minimum qualification criteria Graduation Post-graduation Professional qualification Experience At senior level In case of lawyers
C O R P O R A T E

5 years 7 years
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Continual professional development (training) requirements

6.BOARD MEETINGS
Mandatory Frequency Bimonthly meetings Quarterly meetings Meetings abroad Requires prior approval of central bank No restriction Mandatory attendance requirement 100% attendance 75% attendance 50% attendance

7.NOMINATING COMMITTEE

KEY:
Provision is present No provision/ Not applicable As per requirement of the respective countrys law. Provision is absent.

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5.8.5. Restricted Capacity of Key Executives

The key executives are not allowed to hold directorship in their functional capacity. Moreover, they cannot hold two different positions simultaneously. This restriction hinders the exploitation of customers as well as institution.

5.8.6. Maintenance of Secrecy

No person is allowed to have simultaneous position with the banks/DFIs as CEO / board member/ key executive/ Shariah advisor. This restriction ensures secrecy and confidentiality of banks/DFIs.

CONS

5.8.1. Absence of Nominating Committee

There is no specific committee for the appointment of the directors and CEO. So board responsibilities become over loaded which affect their operating efficiency.

5.8.2. Few Independent Director

There is a provision in the regulations that minimum 25% directors will be independent but their need to increase this number.

5.8.3. No Control on Conflict of Interest

CEOs of large banks hold directorships on other banks board that may create conflict of interest. Although it is not permitted in our regulations but ineffective control provides a room for some CEOs to commit such fraudulent activities.

5.8.4. Political Influence on Board

In spite of the fact that our regulations do not support political influence on board but political persons are still present on board of some banks. This influence retards the performance of some banks.

5.8.5. Mandatory Attendance requirement for Board Meetings

In Pakistan individual director should attend at least half of the board meetings. Since board of directors is responsible for making policies and approving strategies ,so individual director attendance should be increased. In other countries this attendance requirement is 75%.

5.8.6. No specific criteria for Board Performance Evaluation

There is no particular criterion for evaluating the board performance in Pakistan. While in other countries board performance is evaluated every year which undermines the deficiencies and weaknesses in regular operations, thus, improve boards performance.

5.8.7. Depositors representation in the Board

There is no director representing the depositors who are the key stakeholders of banking industry. Banks primary function involves accepting deposits and lending out from these deposits. Despite this, there is no representation of depositors in the board which puts depositors trust at stake.

5.8.8. Minor Shareholders Nominee

In Pakistan the main focus is on sponsor/ executive directors. No member is there on the board that will represent minor shareholders.

5.8.9. Minimum Qualification of Board Members

In Pakistan minimum qualification for board members is graduation. This is not up to the mark as we have entered into the international market and now the world has become the global village. Highly qualified persons should be on the board.

RECOMMENDATIONS
6.1 Incentives for sound corporate governance

SBP should offer incentives for banks to improve their corporate governance. Regarding this, SBP should develop rating mechanisms for the corporate governance of banks. This rating may rate banks specifically on the basis of corporate governance alone or the element of corporate governance may make a major part of a rating system which also includes other elements of banking practices. The procedure for coming up with the ratings of corporate governance of banks should be communicated as clearly as possible and well in advance in order to provide time for banks to reorganize their framework. SECP should also contribute to developing such a rating criteria by providing its knowledge and experience about corporate governance.

6.2

Liaison and Harmony between regulatory authorities

As mentioned above, SECP can assist State Bank of Pakistan in developing and bettering corporate governance framework. Besides, corporate governance is an inter-disciplinary issue and therefore proper liaison should exist between SBP and SECP regarding corporate governance. Acknowledging the unique features of corporate governance of banks and the necessity of harmonization with existing rules applicable to non-financial listed companies, it is recommended that SBP should better corporate governance framework in conjunction with SECP.

6.3

Independent Directors

The number of independent directors in the banks board should be increased sufficiently. Regarding this, it should be noted that the independent director should also be independent from the parent company of the bank, if there is any. Currently, the minimum number of independent directors on the board is 25% which should be increase to at least 50%. This provision will allow board of directors to exercise objective judgment. This will also curtail abusive related party transactions including lending.
6.4 Performance Evaluation

No provision is found in regulatory framework for corporate governance regarding evaluation of performance of the board. Considering the importance of board of directors in sound corporate governance, it is important to have a criterion in place for the evaluation of performance of the board as well as its individual members. Besides, it is also recommended that the board should undertake a formal and rigorous evaluation of its performance with external facilitation of the process every second year and the statement on this evaluation should be presented in a separate section of the annual report.
6.5 Frequency of meetings

Current mandatory requirement for board meetings is once in a quarter. However, it is recommended that the mandatory frequency of board meetings be increased to a meeting every 6 weeks. This will mean that boards will give greater time commitment than has had been normal in the past. This will also ensure seriousness of the board in its job and promote timely decision making.
6.6 Performance-based remuneration

If remuneration of directors is held contingent on their performance, this may well serve as an incentive for the members of the board to perform well with integrity and honesty. The criteria for performance evaluation of board may include assessment of effectiveness of board in terms of achievement of organizations goals.
6.7 Depositors representation in board

There should a mechanism in place that can enable depositors to get representation in the board. Since, the primary focus of regulatory frameworks is to protect depositors interest, having the depositors represented in the boards of banks can greatly minimize risk associated with the corporate governance.
6.8 Formation of nominating committee

There is no provision regarding formation any specific committee for the appointment of directors and the CEO. It is recommended that there be a nomination committee which should lead the process for board appointments and make recommendations to the board. A

majority of members of the nomination committee should be independent non-executive directors. The chairman or an independent non-executive director should chair the committee, but the chairman should not chair the nomination committee when it is dealing with the appointment of a successor to the chairmanship. The nomination committee should make available its terms of reference, explaining its role and the authority delegated to it by the board.
6.9 Regular review & Update of corporate governance framework

The framework for sound corporate governance requires regular review and update in the light of international best practices. Therefore, SBP should look forward to identifying gaps in current regulatory framework as compared to international best practices such as the principles of sound corporate governance by BASEL committee.
6.10 Attendance requirement for board meetings

Currently, the attendance requirement for board of directors in meetings is minimum 50% of the number of meetings held in a year. This provision should be altered such that mandatory attendance requirement is increased to 75% of the total numbers of meetings held in a year. Since board of directors is typically at the top of organizational chart, such a practice will ensure discipline as well as better performance of the organization as a whole.
6.11 Qualification of Board Members

Minimum qualification required to become a board member is currently graduation which should be increased to a minimum of 16 years of education or post-graduation. This will improve the efficiency of the boards as well as their respective banks.

CONCLUSION
The conventional approach to comparative corporate governance issues has tended to assume that specific systems of governance adopted by a specific country determine corporate governance practices in the country. While corporate-governance frameworks encompass both legal and behavioral norms, the wide discretion generally granted to directors means that behavioral norms play a particularly significant role in guiding director behavior. After completing the comparative analysis of corporate governance of Pakistan with the aforementioned countries, we are able to conclude that State bank of Pakistan is working diligently in relation to the policies of corporate governance from the perspective of Board of Directors. Banking Policy & Regulation Department has taken very strict measures for sound and healthy governance in banking industry. In contrast with other countries, it has come to the notice that corporate governance in banking industry is more focused and

efficient. Corporate governance framework in Pakistan boasts solid grounding and is in harmony with the economic scenario of Pakistan. Corporate governance of banks in Pakistan is more robust that various other countries such as Bangladesh. It is for these reasons that the World Bank Report ranked Pakistan first in the areas of corporate governance, performance and efficiency in its 2009 report of Getting Finance in South Asia. However, corporate governance practices in the banking industry of Pakistan still need improvements to tackle with the ever-evolving challenges of the dynamic world. Regarding this, State Bank of Pakistan need to review its current provisions for corporate governance in the light of recommendation put forth by BASEL Committee on banking supervision and regulations of UK-FSA.

REFERENCES

BASEL COMMITTEE ON BANKING SUPERVISION

HTTP://WWW.BIS.ORG/BCBS

CORPORATE GOVERNANCE IN MALAYSIA

HTTP://WWW.BNM.GOV.MY

CORPORATE GOVERNANCE: BANGLADESH

HTTP://WWW.BANGLADESH-BANK.ORG

FINANCIAL SERVICES AUTHORITY: CORPORATE GOVERNANCE

HTTP://WWW.FSA.GOV.UK

HANDBOOK ON CORPORATE GOVERNANCE

HTTP://WWW.SBP.ORG.PK

PRUDENTIAL REGULATIONS: MAS

HTTP://WWW.MAS.GOV.SG

PRUDENTIAL REGULATIONS
HTTP://WWW.SBP.ORG.PK

PRUDENTIAL REGULATIONS: BCB

HTTP://WWW.BCB.GOV.BR