Central Bank of Jordan seeks feedback on new corporate governance instructions

AMMAN — The Central Bank of Jordan (CBJ) on Wednesday tabled new banking corporate governance instructions and requested feedback from all concerned parties.

Communicated to the Association of Banks to consider its reaction before they go into effect, the CBJ indicated in a press statement on Wednesday that the instructions meet one of the recommendations proposed by the National Integrity Committee to enhance governance at the banks’ board of directors.

“The instructions aim at ensuring that board members possess experience and competency besides guaranteeing that there is no conflict of interest,” the statement said. 

The CBJ noted that the new instructions were in line with the principles of the Basel Committee on Banking Supervision, the Organisation for Economic Cooperation and Development, and the Financial Stability Board to address loopholes exposed by the global financial crisis in financial institutions' governance.

Under the new instructions, boards of directors are fully responsible for the financial safety and soundness of the banks as well as their smooth and trouble-free operations.

According to the statement, the boards also carry full responsibility over reliability and  accountability to safeguard the rights of all stakeholders.

Key instructions prevent chairmen from doubling also as general managers, organise the ownership-management relationship, and inscribe the terms and standards needed for board members and senior executives to qualify.

Another obligation requires that financial remunerations be designed so as not to affect the reputation and soundness of banks, be linked to  risks and performance levels, and to be thoroughly disclosed.

Moreover, boards are held responsible to adopt an acceptable level of risk, consistent with the bank’s' strategy in this regard. 

In its statement, the CBJ stressed the role and independence of internal and external auditors, and underlined the importance of independent board members noting that their roles enrich discussions and deliberations during meetings, and help upgrade the performance  of  boards in general.

The central bank affirmed that the new instructions complement its efforts to advance the banking sector in Jordan noting that in 2004 it issued a guideline booklet to board members of banks, and that in 2007 it prepared a corporate governance guidebook that required banks to disclose their own guidelines and the extent of adherence to them.