2. Governance Structure
• Setting strategic goals
– should taking into account the bank’s long term
financial interests, level of risk tolerance and ability
to manage risks effectively
– should be implemented with clearly defined
responsibilities and accountabilities
3. Governance Structure
• Setting strategic goals
– adopt policies, procedures and systems
commensurate and suited to the risk profile and
scope of operations of the bank
4. Governance Structure
• Exercising objective judgment
– select board of directors from a broad pool of
candidates
– have a sufficient number of non-executive directors
in the board
– minimum number of independent directors: at
least 20% but not less than 2 of the members of
the board, rounded up to the nearest whole
number
5. Governance Structure
• Exercising objective judgment
– adopted “5-2-5” rule of the SEC
director can only serve as such in the same
company for 5 consecutive years
the term may be extended for another 5
consecutive years only after a 2-year cooling off
period
after serving for 10 years, the independent
director shall be perpetually barred from being
elected as such in the same company
6. Governance Structure
Audit Committee
CEO, CFO and/or Treasurer shall not be appointed as
members of the audit committee
Risk Oversight Committee
Shall be chaired by a non-executive member of the
board
Shall have at least 1 independent director as member
Corporate Governance Committee
Shall be chaired by an independent director
7. Governance Structure
• Exercising objective judgment
– non-complex banks specifically, thrift; rural and
cooperative banks, may constitute at a minimum,
the audit committee
8. Governance Structure
• Strengthening checks and balances systems
– Banks should have appropriate and effective
checks and balances systems in place
– non-executive members of the board of directors
should conduct regular meetings with the heads of
internal audit, compliance and risk management
functions and the external auditor
9. Governance Structure
• Strengthening checks and balances systems
– internal controls and internal audit comprise the
primary line of defense of banks against abusive
practices
– opinion of external auditors lends credibility to the
financial statements prepared by the bank
– the compliance system contributes to a
strengthened control environment and increase in
franchise value of banks.
10. Compliance function
• Elements of the compliance system
– compliance program duly approved by the board of
directors;
– a constructive working relationship of the BSP; and
– a clear and open communication lines within the
bank to educate and address compliance matters
11. Compliance function
• simple banks may designate a non-executive member
of the board of directors to serve as the chief
compliance officer in a concurrent capacity
