General Responsibility of the Board of Directors
- Directors hold a position of trust to various stakeholders: institution, stockholders, depositors, creditors, management, employees, and the public.
- Stakeholders expect prudent and sound management.
- The board is primarily responsible for corporate governance.
- It should set strategic objectives, policies, procedures, and monitoring mechanisms.
- Management handles daily operations but the board oversees and monitors management actions.
Specific Duties and Responsibilities of the Board of Directors
- Appointment and selection of qualified officers and personnel applying fit and proper standards emphasizing integrity, expertise, and alignment with the board’s vision.
- Setting objectives and business strategies and reviewing performance regularly.
- Ensuring high standards of integrity and corporate values, including prohibiting conflicts of interest and unethical conduct.
- Establishing and enforcing written policies on major business activities with compliance mechanisms.
- Defining clear responsibilities, decision-making authority, and approval hierarchy, including limits on discretionary powers and reserved matters for the board.
- Supervising the institution effectively through systems of checks and balances within the board and management.
- Monitoring and assessing management performance with appropriate reporting systems; formation of governance committees is permitted.
- Adopting and maintaining comprehensive risk management policies covering risk approach, limits, responsibilities, measurement, internal controls, and risk reporting; committees may be formed.
- Constituting key board committees:
- Audit Committee: independent members with finance expertise overseeing internal/external audits and internal controls.
- Nomination Committee: composed preferably of independent members, evaluating qualifications of nominees.
- Holding regular board meetings with full consideration of independent views and recording minutes.
- Keeping board members and shareholders informed on performance and financial condition; allowing board members access to necessary information.
- Ensuring the institution contributes beneficially to the national economy by providing supportive services and facilities.
- Annual assessment of board, committees, CEO, and institution effectiveness, including board composition reviews with benchmarks and peer analysis.
- Ensuring adherence to authority as prescribed by corporate documents and laws; appointing a compliance officer and possibly a compliance committee.
Specific Duties and Responsibilities of Individual Directors
- Avoiding conflicts of interest; conducting fair transactions on terms not less favorable than others; not exploiting position for personal gain.
- Acting honestly, in good faith with loyalty; prioritizing interests of institution and stakeholders including stockholders, depositors, clients, and the public.
- Devoting sufficient time and attention to institution’s affairs; participating actively in meetings and decision-making.
- Exercising judicious evaluation before decisions including questioning and seeking clarifications.
- Exercising independent judgment; voicing positions even if unpopular and supporting beneficial plans.
- Having working knowledge of relevant laws, regulations, institution’s articles, and industry trends.
- Maintaining confidentiality of non-public information unless authorized to disclose.
Director Orientation and Acknowledgment
- Banks/quasi-banks/trust entities must provide all directors a copy of their duties, responsibilities, and relevant regulatory provisions within 30 banking days for incumbents or at election for new directors.
- Directors must acknowledge receipt and certify understanding.
- Copies of acknowledgement must be submitted to supervisory authorities within 15 days.
- Delays in submission are subject to penalties as major reports.
Penalties for Non-Compliance by Directors
- Violation of duties and responsibilities results in penalties per offense:
- P30,000 for commercial and expanded commercial banks’ directors.
- P15,000 for thrift, Islamic banks, and quasi-banks’ directors.
- P5,000 for rural and national cooperative banks’ directors.
- P1,000 for local cooperative banks’ directors.
- Penalties are without prejudice to other sanctions under existing laws.
Repealing Clause and Effectivity
- Circular No. 130 dated June 6, 1997 provisions inconsistent with this Circular are repealed.
- This Circular takes immediate effect upon adoption on May 17, 2001.