The government tabled the amendment bill in the parliament in the last week of November.
Five lawmakers are affiliated with BFIs either in the capacity of chairman, board director or promoter with controlling stake, while half a dozen lawmakers are businessmen or industrialists. While there are still no rules in place to govern conflict of interest of a parliamentarian, experts on corporate governance say that a legislator should at least skip parliamentary proceedings that affect their corporate interests.
“It's unusual for a legislator to hold a position in a private bank. How can we expect that a legislator will not prioritize corporate or financial gains over public interest while making laws? They should choose either the parliament or a bank to avoid any possible conflict of interest,” Tara Prasad Upadhyaya Gyawali, an expert on corporate governance who is also an associate professor at Lumbini Banijya Campus, said.
Civil Bank's Chairman Ichchha Raj Tamang, Prime Commercial Bank's Chairman Umesh Shrestha, Janata Bank's Chairman Uday Nepali Shrestha, Reliance Lotus Finance Ltd's Board Director Rajeev Bikram Shah and Mega Bank's Promoter Duman Thapa are also the members of parliament.
Tamang and Shrestha have registered a dozen of amendment proposals on the draft bill of BAFIA. Among the amendment proposals, the two members, who are also the chairman of the bank, have proposed removing a clause in the bill that restricts a chairman of any BFI to remain at the post for more than two terms.
“There is no written code in the country that says what lawmaker should or should not do to avoid conflict of interest. Lawmakers having corporate interest or affiliated with a bank should remain neutral in the discussion or deliberation of matters that matters his/her bank,” Parshuram Kunwar Chhetri, a former banker and financial consultant told Republica. “The lobby of such parliamentarians to bend the law to suit their interests looks strong as they have been able to convince legislators across all party lines. It's very unfortunate as well as unethical for a legislator, who is affiliated with bank, to actively lobby and influence the lawmaking process for corporate gains.”
The conflict of interest of some lawmakers was visible in the meeting of Finance Committee of the parliament in September last year when the panel grilled Nepal Rastra Bank (NRB) officials to discuss the central bank's decision to raise minimum paid-up capital of the BFIs through the Monetary Policy for Fiscal Year 2015/16. The lawmakers, who were also in the board of the banks, had demanded that the paid-up capital hike requirement be scrapped.
Many observers say the parliamentarians have posed a challenge for the regulator while ensuring financial discipline in the banking industry.
“I do not see a necessity for an honorable member of any constitutional body to be regulated by the central bank,” said former deputy governor of NRB Maha Prasad Adhikari, indicating the discomfort the central bank faces while regulating such bankers.
Chhetri agreed with Adhikari.
“Legislators are above the NRB Governor in hierarchy which may make central bank hesitant in case it needs to take action against the chairman or the board director of any bank while ensuring financial discipline,” added Chhetri.
However, Prakash Jwala, chairman of the Finance Committee, termed the issue as an 'unnecessary exaggeration'. “Legislators can be from various backgrounds -- politics, business or any other sectors. Their expertise can be helpful in drafting any laws. Even if they have corporate interest during parliamentary deliberations, their interests cannot be dominant in the parliament,” he added.
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