Bank Governance Rules in Effect Since March 1st, 2012
All Banks must Comply or Declare
Background
In August of last year, the Board of Directors of the Central Bank of Egypt issued a Decree concerning the application of new rules of governance over banks which were due to be observed as of March 1st, 2012. Now that this date has passed, all banks registered with the Central Bank of Egypt must “comply or declare”, i.e. either fully observe the rules or inform the Central Bank of the reasons why they have not done so and give a timetable for the full compliance to take place.
The Governance Rules
The new Rules are quite detailed (they fall in about twenty pages) and accordingly the following are the key issues and titles stated therein:
A) Board of Directors
• Board composition
• Qualifications and independence of Board members.
• Powers of the Board.
• Responsibilities of the Board
• Assessment of Board members
B) Board Committees
• Executive Committee
• Audit Committee
• Risk Committee
• Remuneration Committee
• Governance Committee
C) Relationship of Board with the Bank
• Relation with senior management
• Relation with internal audit
• Relation with external auditors
• Compliance function
• Risk management function
D) Disclosure and Transparency
E) Relationship of Board with the Shareholders
Comment
The new Governance Rules issued by the Central Bank of Egypt last year are the best articulated effort and most organized in the application of governance principles in Egypt, and they include all aspects of the relationships between the Bank’s Board of Directors and its management, various audit functions, and shareholders. They are also based on the most recent international best practices. Banks in Egypt should carefully observe these rules because failure to comply – or to declare and rectify – could be considered a violation of the Banking Law and of banking supervision requirements.
All Banks must Comply or Declare
Background
In August of last year, the Board of Directors of the Central Bank of Egypt issued a Decree concerning the application of new rules of governance over banks which were due to be observed as of March 1st, 2012. Now that this date has passed, all banks registered with the Central Bank of Egypt must “comply or declare”, i.e. either fully observe the rules or inform the Central Bank of the reasons why they have not done so and give a timetable for the full compliance to take place.
The Governance Rules
The new Rules are quite detailed (they fall in about twenty pages) and accordingly the following are the key issues and titles stated therein:
A) Board of Directors
• Board composition
• Qualifications and independence of Board members.
• Powers of the Board.
• Responsibilities of the Board
• Assessment of Board members
B) Board Committees
• Executive Committee
• Audit Committee
• Risk Committee
• Remuneration Committee
• Governance Committee
C) Relationship of Board with the Bank
• Relation with senior management
• Relation with internal audit
• Relation with external auditors
• Compliance function
• Risk management function
D) Disclosure and Transparency
E) Relationship of Board with the Shareholders
Comment
The new Governance Rules issued by the Central Bank of Egypt last year are the best articulated effort and most organized in the application of governance principles in Egypt, and they include all aspects of the relationships between the Bank’s Board of Directors and its management, various audit functions, and shareholders. They are also based on the most recent international best practices. Banks in Egypt should carefully observe these rules because failure to comply – or to declare and rectify – could be considered a violation of the Banking Law and of banking supervision requirements.