CBE Sets Maximum Tenure for a Bank’
CBE Sets Maximum Tenure for a Bank’s CEO
The Central Bank of Egypt’s ("CBE") Board of Directors issued a decision on 23 March 2016 that prohibits extending the tenure of a bank’s “principal executive officer” beyond nine years (the "Decision"). The Decision elicited many legal questions among media outlets over the past several days. Below is a clarification of the main elements:
- The term “principal executive officer” is not defined in the Egyptian Companies Law, although it has been used in the Bank Corporate Governance Rules issued by the CBE in 2011. This effectively refers to the person occupying the most senior executive position at the bank. Consequently, it applies to the member designated for managing the bank (CEO) as well as the Chairman of the Board of Directors if (s)he was also the chief executive. It does not, however, apply to the non-executive Chairman of the Board of Directors nor does it apply to any of the other board members or any other person fulfilling an executive position at the bank below the chief executive.
- The Decision considers the tenure restriction to have elapsed regardless of whether it was nine consecutive or non-consecutive years. As such, the rule applies even if the incumbent chief executive has fulfilled this duration cap over two periods or more.
- The Decision comes into effect immediately with respect to public sector banks. As to private sector banks, the decision comes into effect when the first general assembly convenes to approve the annual financial statements, after the nine-year period has run out. Nonetheless, if the period had indeed expired before 1 January 2016, the bank has to obtain the approval of the CBE for extending the managing director’s tenure until the next general assembly (although the decision did not specify the duration and procedures of attaining that approval).
- The aforementioned rules apply to foreign bank branches.
The Central Bank of Egypt’s ("CBE") Board of Directors issued a decision on 23 March 2016 that prohibits extending the tenure of a bank’s “principal executive officer” beyond nine years (the "Decision"). The Decision elicited many legal questions among media outlets over the past several days. Below is a clarification of the main elements:
- The term “principal executive officer” is not defined in the Egyptian Companies Law, although it has been used in the Bank Corporate Governance Rules issued by the CBE in 2011. This effectively refers to the person occupying the most senior executive position at the bank. Consequently, it applies to the member designated for managing the bank (CEO) as well as the Chairman of the Board of Directors if (s)he was also the chief executive. It does not, however, apply to the non-executive Chairman of the Board of Directors nor does it apply to any of the other board members or any other person fulfilling an executive position at the bank below the chief executive.
- The Decision considers the tenure restriction to have elapsed regardless of whether it was nine consecutive or non-consecutive years. As such, the rule applies even if the incumbent chief executive has fulfilled this duration cap over two periods or more.
- The Decision comes into effect immediately with respect to public sector banks. As to private sector banks, the decision comes into effect when the first general assembly convenes to approve the annual financial statements, after the nine-year period has run out. Nonetheless, if the period had indeed expired before 1 January 2016, the bank has to obtain the approval of the CBE for extending the managing director’s tenure until the next general assembly (although the decision did not specify the duration and procedures of attaining that approval).
- The aforementioned rules apply to foreign bank branches.