Mutual Banks Act, 1993 (Act No. 124 of 1993)

Regulations

Regulations relating to Mutual Banks

Chapter III : Application Procedures

37. Guidelines relating to conduct of directors
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(1)Every director of a mutual bank shall acquire a basic knowledge and understanding of the conduct of the business of a bank and of the laws and customs that govern the activities of such institutions. While it is not required of every member of the board of directors of a mutual bank to be fully conversant with all aspects of the conduct of the business of a bank, the competence of every director of a mutual bank shall be commensurable with the nature and scale of the business conducted by that mutual bank.

 

(2)A director and executive officer of a mutual bank shall perform his functions with diligence and care and with such a degree of competence as can reasonably be expected from a person with his knowledge and experience.

 

(3)In view of the fact that the primary source of funds administered and utilized by a mutual bank in the conduct of its business is deposits loaned to it by the general public, it shall be the duty of every director and executive officer of a mutual bank to ensure that risks that are of necessity to be taken by such mutual bank in the conduct of its business are managed in a prudent manner.

 

(4)The conduct of the business of a mutual bank entails the management of risks, which may include the following types of risks namely—
(i)solvency risk;
(ii)liquidity risk;
(iii)credit risk;
(iv)currency risk;
(v)market risk (position risk);
(vi)interest-rate risk;
(vii)counterparty risk;
(viii)technological risk; or
(ix)operational risk.

 

(5)The directors of the mutual bank shall annually report to the Authority on the effectiveness of the system of internal controls of the bank relating to financial and regulatory reporting and compliance with the Act and the Regulations.

 

(6)For the purposes of this regulation "director " includes an alternate director.