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Banking Industry Compliance Updates: BSP Issues Revised Governance Standards for Philippine Financial Institutions
The Bangko Sentral ng Pilipinas (BSP) has issued revised guidelines on the election of directors and independent directors in banks and non-bank financial institutions. The goal of this move is to strengthen corporate governance and compliance frameworks.
New Guidelines
Under the new guidelines, foreign nationals are now allowed to become members of the board of directors up to the extent of their participation in the equity of BSP-supervised financial institutions. Additionally, the regulator has clarified the qualifications and requirements for directors, stating that they must be “fit and proper” based on factors such as:
- Integrity
- Physical and mental fitness
- Relevant education and training
- Independence
Exemptions
Exemptions from these requirements have been granted to:
- Former chief justices and associate justices of the Supreme Court
- Distinguished Filipino and foreign nationals who served as senior officials in central banks and financial regulatory agencies
- Filipinos with recognized stature and influence in the banking community
New Limits on Tenure
The revised guidelines also impose new limits on the tenure of independent directors:
- Maximum cumulative term of nine years for non-cooperative banks
- Maximum cumulative term of eight years for cooperative banks
- After this period, they are barred from serving as independent director in the same institution but may continue to serve as regular director
Other Key Changes
Other key changes include:
- Prohibitions on members of the board of directors holding positions such as corporate secretary or chief compliance officer
- Requirements that the positions of chairperson and CEO not be held by the same person
- Exceptional cases where a lead independent director may be appointed with approval from the Monetary Board
Compliance Deadline
The BSP has also reiterated its requirement that officers of banks and financial institutions must be “fit and proper” for their positions. Banks have until the end of June next year to address issues related to interlocking positions in the election of directors and appointment of officers.