The State Bank of Pakistan (SBP) has revised its Corporate Governance Regulatory Framework (CGRF), introducing changes to the classification of banks and development finance institutions (DFIs) and updating the maximum remuneration payable to directors for attending board and committee meetings. The revisions, outlined in a circular issued by the Banking Policy & Regulations Department, aim to enhance governance and ensure remuneration is aligned with the size and profitability of financial institutions.
Under the updated framework, banks and DFIs will be categorized into two distinct groups based on asset size or after-tax profitability as reflected in their latest audited annual accounts. The first category includes institutions with assets exceeding Rs1 trillion or after-tax profits above Rs5 billion. Directors of these entities will now be entitled to a maximum remuneration of up to Rs1.2 million per board or committee meeting.
The second category encompasses all other banks and DFIs that do not meet the thresholds for the first category. For these institutions, directors’ maximum remuneration has been capped at up to Rs750,000 per meeting. This tiered structure seeks to ensure that compensation remains proportional to institutional scale and financial capacity, while supporting prudent governance practices across the banking sector.
The SBP emphasized that all other instructions under the Corporate Governance Regulatory Framework will continue to apply, ensuring consistency in governance oversight while incorporating the revised remuneration limits.
The updated CGRF framework is expected to strengthen accountability in board decision-making, provide clear guidance on director compensation, and align remuneration policies with institutional performance metrics. By setting defined caps, the SBP aims to balance fair compensation for directors with cost efficiency and regulatory prudence.
The circular also provides a concise reference table summarizing the revised categorization and associated remuneration limits:
Category | Parameters to Determine Category | Maximum Remuneration per Board / Committee Meeting
First | Banks/DFIs with assets above Rs1 trillion or after-tax profit above Rs5 billion (as per latest audited accounts) | Up to Rs1,200,000
Second | All other banks/DFIs not falling under the first category | Up to Rs750,000
Industry analysts suggest that the revised framework could improve transparency and governance practices across Pakistan’s banking sector, encouraging institutions to maintain robust oversight and remuneration policies while ensuring cost discipline.
By linking director compensation to the scale and profitability of institutions, the SBP’s update reflects a continued focus on aligning corporate governance with institutional performance and regulatory compliance, reinforcing the credibility of the country’s financial system.
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