Reserve Bank of India Sets Out Guidelines on Bank Compliance Function
14 Sep 2020

The RBI (Reserve Bank of India) has issued new guidelines on banks’ compliance functions and the appointment of their chief compliance officers (CCO).

Banks are already required to have an effective compliance culture, an independent corporate compliance function and a strong compliance risk management programme at the bank and group level – headed by a designated CCO selected through a suitable process with appropriate ‘fit and proper’ evaluation and selection criteria.

“However, it is observed that the banks follow diverse practices in this regard,” the RBI said. The new guidelines are aimed at ensuring a uniform approach with regard to compliance and risk management culture across the banking industry.

Under the guidelines, banks must have a board-approved compliance policy clearly spelling out its compliance philosophy, expectations on compliance culture taking into account accountability, incentive structure and effective communication and challenges.

According to the RBI, the policy should lay “special thrust” on building up compliance culture, vetting of the quality of supervisory and regulatory compliance reports to the RBI by top executives, and should be reviewed at least once a year.

The CCO must be appointed for a minimum fixed period of three years. The individual should be a senior executive of the bank, preferably in the rank of a general manager or an equivalent position, or otherwise recruited from outside the bank.

The CCO must be 55 years of age or younger, and have overall experience of at least 15 years in banking or financial services – of which at least five years should have been in the related management functions.

The CCO may only be transferred or removed from his post before completion of the tenure in exceptional circumstances, and with the explicit prior approval of the bank’s board “following a well-defined and transparent internal administrative procedure”.

Read more at Regulation Asia

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