The State Bank of Pakistan (SBP) has introduced revised maximum remuneration limits for directors attending board and committee meetings of banks and Development Finance Institutions (DFIs), marking an important update to the country’s banking governance framework. The changes were communicated through a circular issued on Friday and are aimed at reinforcing transparency, accountability, and sound governance practices across the financial sector.
According to the central bank, the revisions form part of amendments to the Corporate Governance Regulatory Framework (CGRF), which governs board composition, responsibilities, and compensation structures within regulated financial institutions. The SBP noted that the updated framework builds on the provisions outlined in BPRD Circular No. 5 of 2021 and specifically revises Regulation G-14 (2)(v), which sets parameters for categorising banks and DFIs and determining the maximum remuneration payable to directors per meeting.
Under the revised guidelines, banks and DFIs have been divided into two distinct categories based on their financial size and profitability, as reflected in their latest audited annual financial statements. Category One comprises institutions with total assets exceeding Rs. 1 trillion or after-tax profits above Rs. 5 billion. Directors serving on the boards or committees of these larger institutions will now be eligible to receive a maximum remuneration of up to Rs. 1,200,000 per meeting.
Category Two includes all remaining banks and DFIs that do not meet the specified thresholds for assets or profitability. For directors serving in these institutions, the maximum permissible remuneration has been capped at Rs. 750,000 per board or committee meeting. The SBP clarified that these caps apply uniformly across regulated entities falling within each category, ensuring consistency in remuneration practices.
The central bank stated that the revised limits are intended to strike a balance between fair compensation and prudent governance standards. By aligning remuneration with institutional size and financial capacity, the SBP aims to ensure that director compensation remains reasonable, transparent, and justifiable within the broader context of corporate governance.
Regulatory observers note that board remuneration has increasingly come under scrutiny as financial institutions expand in scale and complexity. Appropriate compensation structures are viewed as a key element of effective governance, as they help attract experienced professionals while discouraging excessive or misaligned incentives. The SBP’s revised framework reflects an effort to formalise and standardise compensation practices across the sector.
The updated remuneration caps are also expected to contribute to improved board effectiveness by clarifying expectations and reducing ambiguity around director payments. Clear regulatory guidance on compensation can help institutions streamline board processes, enhance oversight, and ensure that governance decisions are made in the best interest of stakeholders, including depositors and shareholders.
In recent years, the SBP has placed increased emphasis on strengthening corporate governance within the banking sector, particularly in light of evolving regulatory requirements and growing systemic risks. Amendments to the CGRF are part of a broader regulatory strategy aimed at improving risk management, accountability, and compliance standards across banks and DFIs.
Market participants view the revised remuneration limits as a continuation of the central bank’s efforts to modernise governance frameworks while maintaining regulatory discipline. By linking compensation thresholds to objective financial criteria, the SBP seeks to promote consistency and fairness while recognising differences in institutional scale.
The SBP reiterated that banks and DFIs are required to ensure full compliance with the revised framework and to update their internal policies accordingly. Institutions are expected to reflect the new remuneration caps in their board-approved policies and ensure that payments to directors remain within the prescribed limits.
Overall, the revision of directors’ remuneration limits underscores the SBP’s focus on reinforcing governance standards in Pakistan’s financial sector. By enhancing clarity around board compensation, the central bank aims to support stronger oversight, improved institutional performance, and greater confidence in the banking system.
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