Jan 01, 2008 (LBO) – New corporate governance rules for Sri Lankan banks would force long-standing directors to retire, prevent banks giving favoured treatment to related parties and ensure separation of power between the board and executive management. The new rules by the Central Bank, meant to promote the safety and soundness of the banking system, would infuse young blood into the top management of banks, where geriatric directorates are common as in many other companies in the island.
Long tenures and inter-locking directorates are common practices, resulting in criticism that cronyism and back-door deals are rife in the business community.
A Central Bank statement on the rules for Licensed Commercial Banks and Licensed Specialised Banks, effective from January 1, 2008, said there is a strong need for commitment and effective contribution to the prudent management of the affairs of banks.
“It is very likely that the effectiveness of such commitment and contribution would tend to decrease with advanced age of directors and more particularly, if the age of such director is well beyond the normal age of retirement, as generally accepted in the country,” the rules said.
Under the new rules, the directors have to be below 70 years.