Banks call for easier rules for appointment of directors

Banks have called for relaxation of some provisions of the Banking Companies Act, particularly the requirement to get approval from Bangladesh Bank for appointing directors.

Bangladesh Association of Banks placed the demands yesterday in a meeting with Finance Minister AMA Muhith.

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The government had been considering tightening some provisions in the law for over a decade to rein in irregularities and indiscipline in the sector.

But due to opposition from banks, the amendments did not materialise until 2013, when the International Monetary Fund tagged it as one of the conditions for receiving $1 billion under the Extended Credit Facility.

Now that Bangladesh has successfully completed IMF's ECF programme, the banks have proposed for relaxation of the amendments made to the law in 2013.

When reporters wanted to know Muhith's position on the matter after the meeting, he remained elusive as there are legal matters involved.

“The amendments to the law have to be discussed with the prime minister. Then the amendments have to be passed in the cabinet,” he added.

A BAB team led by its Chairman Nazrul Islam Mazumder presented the logic behind their demands to Muhith.

As per the original Banking Companies Act, the directors must be elected by the shareholders from among themselves at the annual general meeting.

But the amendment to the law in 2013 says the banks must take approval from the central bank for appointing directors.

“The right of the shareholders/owners has been curtailed as well as the position of the directors (owners) in the said law has been levelled with managing director,” BAB said.

In response, BAB said there is scope to take action against such persons under other provisions or rules.

As per the amendment to the law, no director can continue for more than six years in two terms. One can become director again after taking a pause for one term.

BAB said the law may be applicable to directors coming from outside, like independent directors, appointed directors or ex-officio directors. If this law is applied in case of sponsor-directors, they will be deprived of their right to wealth or property.

Since the sponsors have invested their money to make up the paid-up capital of the bank, it would not be judicious to deprive them of their position and wealth simultaneously, BAB said.

“We expect that you will kindly agree with us that the legal right of sponsor to his wealth and position should be maintained and protected. We propose that this law should not be applicable for sponsor director,” Mazumder said.

When the reporters asked whether the directors want to stay in their position for a lifetime, Mazumder said they did not want that.

The finance minister said BAB wants the timeframe extended to 10 years or 15 years.

BAB also proposed amendment to the definition of family in the Bank Company Act.

Under the act, family means spouse, parents, siblings, children and any person dependent on the sponsor director.

But BAB says if the person is elderly, have separate business or fully independent, he/should should not be counted as family.

The finance minister said at present there are various definitions of family, so a uniform definition is needed.

Representatives of the Association of Bankers, Bangladesh, an organisation of the chief executives of banks, were also present in the meeting.