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RBI Lays Down Guidelines for Banks to Appoint Chief Compliance Officers: September 2020

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RBI-lays-down-guidelines-for-banks-to-appoint-chief-compliance-officersIn order to ensure uniformity and effective management of compliance risk in banking sector, on September 11, 2020, Reserve Bank of India (RBI) laid down guidelines for “Compliance Functions in Banks and Role of Chief Compliance Officer (CCO)” stating appointment and tenure of chief compliance officer (CCO), policy (which should be reviewed at least once a year), and reporting requirements and duties of the compliance function, among others.

  • With regards to appointment of CCO, he/she must be a senior executive of the bank, preferably in the rank of a General Manager (GM) or an equivalent position (not below two levels from the CEO) with no vigilance case or adverse observation from the RBI should be pending against the candidate. CCO could also be recruited from the market.
  • CCO should be appointed for a minimum fixed period of three years with age not more than 55 years.The Audit Committee of the Board (ACB) / Managing Director (MD) & CEO should factor this requirement while appointing CCO.
  • No vigilance case or adverse observation from RBI, shall be pending against the candidate identified for appointment as the CCO.

Key Points from guidelines:

-Selection of the candidate for the post of the CCO should be done on the basis of a well-defined selection process and recommendations made by the senior executive-level selection committee constituted by the board for this purpose.

-The CCO shall have direct reporting lines to the MD & CEO and/or Board/(ACB) of the bank.

-Banks that already have a CCO, they should follow the indicated processes for selection within 6 months, and are free to reappoint the current incumbent as the CCO if she/he meets all the requirements.

-As per guidelines there should not be any “dual hatting” means CCO should not be given any responsibility which brings elements of conflict of interest.

-The guidelines also state processes for identifying, assessing, monitoring, managing, and reporting on compliance risk throughout the bank.

-As per reporting requirements, prior intimation to the RBI’s Department of Supervision should be provided before appointment, premature transfer/removal of the CCO.

-A bank shall also develop and maintain a quality assurance and improvement programme covering all aspects of the compliance function.

Authority – The CCO and compliance function shall have the authority to communicate with any staff member and have access to all records or files that are necessary to enable him/her to carry out entrusted responsibilities in respect of compliance issues. This authority should flow from the compliance policy of the bank;

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About Reserve Bank of India (RBI):
Headquarters– Mumbai, Maharashtra
Formation– 1 April 1935
Governor– Shaktikanta Das
Deputy Governors– 4 (Bibhu Prasad Kanungo, Mahesh Kumar Jain, Michael Debabrata Patra, one is yet to be appointed).