The Central Bank of Egypt (CBE) announced on Sunday that it had made some amendments to the rules of governance for the formation of banks’ board of directors (BOD).
This comes with the aim of strengthening governance and in line with international best practices, in a manner that ensures that the banks’ boards of directors monitor the work of executive management.
The central bank stated in a letter addressed to banks, that the amendments included that the bank’s board of directors should consist of an appropriate number of members who are qualified for their positions as members of the board of directors or its committees and who have sufficient understanding of their tasks with the appropriate diversity of abilities, skills, experience, and age group.
A board of directors is to represent a member from the shareholders if their total contributions represent 5% or more, and the representation of women on the bank’s BOD shall not be less than two members at least.
It also included the necessity of a complete separation between the responsibilities, tasks and positions of the chairman of the board of directors and the chief executive officer (the managing director), with the same person not being allowed to assume both tasks. “The Chairman of the Board of Directors shall be a non-executive member,” the letter added.
CBE explained that the amendments also included that the formation of the board should include two executive members at most, and the rest of the members shall be non-executive, provided that at least two independent non-executive members are among them.
The term of membership of the Board of Directors for a non-executive member is two cycles with a maximum period of 6 consecutive or separate years, and it may be extended for one additional term (3 years) with strong justifications and with the approval of the Central Bank.
The amendments included the necessity of taking into account that the committees of the Board of Directors should be assumed by non-executive members, and it is preferable that they be from the independent non-executive members so that one independent member may chair more than one committee except for the audit committee, while the independent non-executive member who chairs the audit committee may not chairs another committee.