About 6 months ago, the task of searching for independent members of the board of directors of banks was like an attempt by the banking policymakers to generate high operating profits, with low risks, in a business environment that is already facing various complications. It is no secret that this situation has created widespread pressure on banks, especially those looking for special characteristics in their independent members.
Between the serious move to meet the requirements of the Central Bank of Kuwait, and the numbers required to fill the seats of independent members, which are a supervisory set of 4 in each bank, and the appropriate expertise already available on the other hand, it seemed that bridging the gap would not be easy banking, reports Al-Rai daily.
However, it seems that something has recently changed in favor of the plans of the banks in this regard, to the extent that it is correct to say that the recent period represented an unprecedented opportunity for banks after they enjoyed unexpected comfort in choosing who would occupy the seats of their independent members.
According to the Central Bank’s instructions issued in September 2019, the number of independent members of the bank’s board of directors must not be less than two, starting from June 30, 2020, and 4 members, starting from June 30 2022, in order not to create a sudden demand on the independent members and to allow the banks to gradually apply this amendment.
According to this case, Kuwaiti banks (10 banks) will be required to complete the appointment of 40 independent members to their prospective boards, 22 of whom are currently appointed, bearing in mind that according to the requirements of the Capital Markets Authority, it is required that the boards of directors of companies subject to its supervision include an independent member (calculated among the four in the case of banks), which digitally means banking need to appoint 18 independent members.
A short time ago, banks were under the challenge of competition to attract independent members in a timely manner, while the supply of them that met the conditions was insufficient to cover the wide banking demand in this sector.
But suddenly, the banks found themselves in front of a human wealth of government leaders who recently retired or apologized for continuing the memberships of the bodies they represent.
However, with a group of personalities with expertise and competencies, whom, months ago, it was difficult to flirt with, even by talking about their plans after their retirement from government service, attract them in the future to work in the private sector.
Without any complexity, the past months witnessed a wave of government retirements that included many strategic institutions, in addition to the expiry of the terms of the boards of directors of institutions and supervisory bodies, of which quite a few members who represent the experienced private sector expressed their unwillingness to renew.
Here, the banks began to open wide eyes to benefit from some of these leaders, by working to attract them to their boards of directors as independent members, especially those who enjoy a reputation and a distinguished leadership history.
In this regard, responsible sources revealed to Al-Rai that banks had recently nominated former senior government officials to the Central Bank to fill the seats of their independent members and that they had received initial regulatory approvals indicating that their candidates fulfilled the conditions.
From the banking point of view, Waffer led the retired government leaders to prepare the banks for a new phase, with which they are supposed to move from combating the scarcity of adequate human supply to a state of recovery in choosing personalities that are highly relied upon to provide added value to their boards of directors in the future.
What fuels this is that a large segment of the targeted bankers was at the head of government institutions responsible for managing billions in investments and assets, while some of them were involved in making regulatory policies and are professionally competent, who have the necessary experience, knowledge, skill, and independence to enable them to perform their duties efficiently and competently.
In light of the experiences enjoyed by some retired government officials, members of the boards of directors of government agencies, and supervisory institutions that have expired, it can be expected that the coming banking days will witness strategic changes in strengthening their boards of directors, by attracting heavyweight leaders who are known by the government as expert, efficient and transparent personalities who are familiar with the rules of governance.
As a result, it is likely that some bank nominations to its boards of directors will consolidate the principle of the independence of members, which is one of the foundations of sound governance practices, and then confirm decision-making with impartiality and objectivity, for what is in the interest of the bank, not exposing it to risks, maintaining public confidence in the bank, and strengthening financial stability.
The recent wave of government retirements, specifically those who can be relied on bankers, are leading to improve the optimistic expectations regarding the future of public policymaking for banks, at a time when the repercussions of the Corona crisis are still imposing themselves, and strongly on markets locally, regionally and globally.
What increases the importance of attracting leaders who have the ability mixed with experience to extrapolate the banking future, are the recent and radical changes that have occurred even on the axioms of banking as an investment and a risk.
In practice, banks are not the only ones benefiting from the abundance of government pensions, as the option of polarization has also become available to all private sector companies, requesting supervisory fulfillment of the entitlement to appoint an independent member on their boards of directors.
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