In a letter sent to NRB on Tuesday, Nepal Bankers´ Association (NBA), the apex body of Nepal´s commercial banks, has argued that the task of fixing perks and benefits for chief executives of banks and financial institutions should be left to the board of directors of the concerned institutions.[break]
“The board of directors of concerned institutions and not the central bank should take care of the issues related to perks and benefits of chief executives,” the letter stated and added that any attempt made by the central bank in regulating salaries of bank staffs on the basis of a specific ratio will violate the existing law.
As per the clause 26 (5) of Bank and Financial Regulation Act, perks and benefits of CEOs of financial institutions will be fixed by board of directors of concerned institutions. Any attempt to fix salary on the basis of a ratio between lowest and highest employees can unnecessarily provoke lower level staffs, chief executive of a commercial bank told Republica on Tuesday.
The bankers have also urged the central bank to conduct a study on standard procedures that are being practiced in US, Europe and India before jumping into a specific conclusion. He further claimed that nowhere in the world exists the practice of fixing salaries and benefits of chief executives of financial institutions on the basis of a certain ratio between the lower and highest ranking officials.
“Even during the last year´s financial crisis in the West, only the variable salary that is directly linked to the profits was lowered. Fixed salary was never changed,” the banker added.
Meanwhile, the central bank has said that it has no intention to curb perks and benefits being enjoyed by the chief executives of financial institutions. “We are just looking into possibilities of introducing an amicable ratio between the lowest and highest ranks within a financial institution,” said an NRB official, who preferred to be unnamed.
According to an NRB study, the perks and salary of a CEO of a national level commercial bank ranges from Rs 500,000 to Rs 1.4 million.
“I think we don´t need to respond to the NRB´s urge to comment on perks and benefits that we are getting from bank because we negotiated our salary and benefits with the board of directors and not with NRB,” said one banker on condition of anonymity.
A fresh round of debates over salaries of CEOs emerged after the central bank sent letters to all financial institutions about two weeks ago, asking their opinions on possible appropriate ratio of salary and benefits between the highest and lowest ranking officials in financial institutions.
Before sending the letter, the central bank had also asked all the financial institutions to provide detailed information on the total perks and benefits that their chief executives have been enjoying for the last three years.
Apart from that, the central bank had also sought information on other non-financial facilities like vehicles, housing, helpers and travel costs, among others offered to the chief executives of financial institutions.
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