Banking News

§  SEBI sets seven-board cap for independent directors:

In a move to promote good business practices, the SEBI board on Thursday approved new corporate governance norms that restrict the number of independent directors on a company board, spell out whistleblower policies, and institute checks on salaries of key managerial persons, among other things. Under the new rules, an individual can serve as an independent director on a maximum of seven listed companies. The SEBI Board also decided that if an individual is a whole-time director in a listed company, he can serve as an independent director in a maximum of three companies. Also, if one has completed five years or more as an independent director, he will be eligible for just one more term of five years. Managerial remuneration will be decided by a compensation committee headed by an independent director.

§  ICRA downgrades United Bank’s Tier- II bonds, CDs:

Rating agency ICRA announced on Thursday a downgrading of United Bank of India (UBI)’ s capital bonds (Tier- II) and certificates of deposit ( CDs), due to a higher than expected deterioration in asset quality, pressures on margins and profitability. The ratings have been put on a watch with negative implications, ICRA stated. It cut the rating for lower Tier- II bonds from AA- to A-. The rating for CDs has been downgraded from A1+ to A2+. ICRA said the revision reflected the considerably higher than expected deterioration in asset quality. On February 11, Fitch, another rating agency, warned UBI’s recent losses might result in the state-run lender’s capital ratios falling below the regulatory minimum and test the regulators approach to the Basel- III capital rules.

§  Insurers allowed to invest in banks’ new instruments:

The Insurance Regulatory and Development Authority (IRDA) has allowed insurance companies to invest in new instruments issued by domestic banks. This includes debt capital instruments, redeemable non-cumulative preference shares and redeemable cumulative preference shares under Tier-II capital. IRDA had earlier allowed insurers to invest in perpetual debt instruments of banks’
Tier-I capital and debt capital instruments of upper Tier-II capital. The regulator has said the debt instrument issued by banks shall be rated not less than ‘AA’ by an independent, reputed and recognised rating agency, registered with market regulator SEBI. Further, if the instruments are downgraded below AA, such investments shall be re-classified as ‘Other Investments’.