RBI Notifies Guidelines For Uniform Compliance Across Banks

On Friday, the Reserve Bank of India (RBI) released a circular on guidelines that are meant to bring uniformity in compliance culture followed by banks.

The central bank said that as part of a robust compliance system, banks are required, to have an effective compliance culture, independent corporate compliance function and a strong compliance risk management programme at bank and group level.

"Such an independent compliance function is required to be headed by a designated Chief Compliance Officer (CCO) selected through a suitable process with an appropriate 'fit and proper' evaluation/selection criteria to manage compliance risk effectively," it added.

According to the guidelines:
A bank shall lay down a Board-approved compliance policy clearly spelling out its compliance philosophy, expectations on compliance culture covering Tone from the Top, Accountability, Incentive Structure and Effective Communication & Challenges thereof, structure and role of the compliance function, role of CCO, processes for identifying, assessing, monitoring, managing and reporting on compliance risk throughout the bank.

CCO shall be appointed for a minimum fixed tenure of not less than 3 years. He/she shall be a senior executive of the bank, preferably in the rank of a General Manager or an equivalent position (not below two levels from the CEO) but cannot be more than 55 years of age.
CCO shall have an overall experience of at least 15 years in the banking or financial services, out of which minimum 5 years shall be in the Audit/Finance/Compliance/Legal/Risk Management functions.

The CCO shall have direct reporting lines to the MD & CEO and/or Board/Board Committee (ACB) of the bank. He/she shall not have any reporting relationship with the business verticals of the bank and shall not be given any business targets. Further, the performance appraisal of the CCO shall be reviewed by the Board/ACB.