SBP develops guidelines on performance evaluation of BoDs

The State Bank of Pakistan (SBP) has developed guidelines on performance evaluation of board of directors aimed at aligning regulatory regime with best international practices.
According to BPRD Circular No 11 of 2016 issued on Monday, the performance evaluation of a board plays a very important role in gauging the contribution of individual board members and overall board towards meeting the strategic goals of a financial institution. Therefore to keep pace with the ever-changing business environment and align the SBP's regulatory regime with best international practices, "Guidelines on Performance Evaluation of Board of Directors" have been developed.
These guidelines are meant to facilitate board of directors to carry out their performance evaluation including individual board members and committees. The guidelines provide basic mechanism, techniques and approaches to be incorporated in performance evaluation model of each bank/DFI. Henceforth, the board of directors will annually conduct their performance evaluation whereas the same should be undertaken by an external independent evaluator at least once in every three years.
The chairman of the board of directors will be responsible for the implementation of these guidelines with immediate effect. According to guidelines, as the regulator and supervisor of banks, the State Bank has a crucial role in steering the corporate governance reforms for banking sector. In this regard, the SBP has implemented a comprehensive corporate governance regime for banks, which is driven by a robust legal and regulatory framework.
With the intention to further strengthen corporate governance regime and to bring uniformity in the existing practices of performance evaluation of boards, the guidelines on performance evaluation of board of directors have been developed. These guidelines will provide the basic mechanism, techniques and approaches through which the performance of boards shall be evaluated. Keeping in view the size, complexity and structure of the institution, the board can formulate its performance evaluation framework in the light of these guidelines.
The SBP said that an effective board with appropriate skill mix and competencies can significantly enhance the performance of a bank/DFI. Therefore, the performance evaluation is vital to determine the strengths as well as weaknesses of overall board, its committees and individual board members in order to increase their overall effectiveness.