SBP Allows Bank Directors to Serve on Boards of Their Wholly-Owned Exchange Companies

In a move aimed at strengthening institutional coordination between banks and their wholly-owned subsidiaries, theState Bank of Pakistan(SBP) has amended itsCorporate Governance Regulatory Frameworkto allow board members of banks to also serve as directors on the boards of their associated exchange companies. According to a circular issued by the central bank, amendments have been made toRegulation G-4, Paragraph 1(f). The updated regulation now permits thePresident/CEO or Director of a bankto serve as aDirector of an exchange company wholly owned by that bank, provided that an additional affidavit is submitted to the concerned institutions. Previously, individuals serving as Directors or Presidents/CEOs of banks and Development Finance Institutions (DFIs) were prohibited from holding positions such asChairman, Director, CEO, CFO, Chief Internal Auditor, Financial Advisor, Research Analyst, or Traderin exchange companies, stock exchanges, brokerage firms, or credit bureaus. The SBP has also clarified that aboard member of the Pakistan Stock Exchange (PSX)may be appointed as a board member of any bank or DFI if they serve as anindependent directorat the PSX and have no association with other restricted categories. This development follows SBP’s earlier decision—made roughly a year ago—to allow banks toestablish their own exchange companiesin order tostreamline foreign exchange operationsacross the country. Since then, several banks have set up exchange subsidiaries after receiving regulatory approval from the SBP.