The Board of the bank is ultimately responsible for oversight of the bank’s associations with its related parties and for approving policies governing the bank’s dealings and associations with its related parties. The Board must ensure that these policies are reviewed at least annually and that they remain adequate and appropriate for the bank’s risk appetite, risk profile, capital, balance sheet size and the complexity of the bank.
ii.
A bank is required to have policies and procedures on related party exposures/transactions.
iii.
A bank is required to have adequate systems and controls in place to identify, measure, monitor and report related party exposures/transactions of the bank in a timely basis and ensure related party exposures/transactions of the bank are reviewed at least quarterly.
iv.
Exposures/transactions to related parties shall only be considered on arm’s length basis and without any preferential treatment. Furthermore, any such credit exposures/transactions should also be strictly in line with the bank’s credit policy and procedures and policies and procedures on related party exposures/transactions.
v.
Any exposure/transaction to a related party or any variation of the terms of a related party exposure/transaction should be approved at the level of Board of Directors or its delegated authority. While considering any proposal of lending to a board member or any of their connected parties, the Board of Directors shall ensure that the concerned board member would neither participate in the discussion nor influence such a decision.
vi.
A bank should institute procedures to prevent the beneficiaries of any credit exposure/transaction being part of the processing or approval of such exposure/transaction.
vii.
Any facilities granted by a bank to its key executives/members of senior management as a part of their employment contract/compensation package shall be exempt from the application of these rules.
