Question & AnswerQ&A (BSP CIRCULAR NO. 283)
The board of directors exercises the corporate powers, conducts the business, and controls all property of the bank/quasi-bank/trust entity. Their powers are original and cannot be revoked by the stockholders.
The board has responsibilities towards the institution itself, stockholders, depositors and other creditors, management and employees, and the public at large.
The board must select and appoint qualified officers, establish adequate selection processes, apply fit and proper standards for key personnel, and set appropriate compensation packages consistent with stakeholder interests.
The board must establish objectives and draw up a business strategy, ensure regular review of performance against the plan, and take corrective action when needed.
The board must conduct affairs with a high degree of integrity, prescribe corporate values and codes of conduct, prohibit conflict of interest and unethical conduct, and implement policies preventing the use of the institution for criminal or illegal activities.
The board must establish sound written policies on major activities, clearly assign responsibilities and decision-making authorities with hierarchical approvals, and reserve major decisions such as capital expenditures and investments to itself.
The board must constitute an Audit Committee composed of independent members with accounting/finance experience, and a Nomination Committee of at least three members, preferably independent, to oversee qualifications for board and key appointments.
The board must meet regularly, give full consideration to independent views, and duly minute all meetings.
Directors may be penalized per violation as follows - P30,000 for commercial bank directors; P15,000 for thrift, Islamic banks and quasi-banks directors; P5,000 for rural and national cooperative banks; and P1,000 for local cooperative banks directors.
Directors must conduct fair business transactions, avoid situations causing conflict of interest, not use their position for personal profit or advantage, and ensure that any unavoidable transactions are conducted on terms not less favorable to the institution.
Directors must observe confidentiality of non-public information acquired due to their position and not disclose such information without board authority.
Directors must devote necessary time, be knowledgeable about the institution, actively participate in board and committee meetings, review materials, ask questions, and avoid nomination if they cannot adequately dedicate time.
A compliance officer is appointed by the board to coordinate, monitor, and facilitate compliance with existing laws, rules, and regulations, vested with proper authority and resources, possibly supported by a compliance committee.
The board must assess at least annually its own performance, the effectiveness of its committees, the CEO, and the institution, and regularly review board composition for balanced membership.