The Islamic Development Bank expressed dismay at the recent changes that took place at Islami Bank Bangladesh Ltd without the consent of the foreign shareholders who own a majority stake in the Bangladeshi lender.

In a letter to Finance Minister AMA Muhith, the Jeddah-based lender said the foreign shareholders, who own more than 52 percent of shares at IBBL, feel that the governance of the bank has been taken away from the foreign shareholders and given to the local shareholders and independent directors.

“This recent high-level change at IBBL is yet another example of important decisions being taken without due knowledge or consent of the foreign shareholders,” IDB President Bandar MH Hajjar wrote on January 24. 

The letter from the IDB came nearly three weeks after the changes were made to the posts of IBBL's chairman, managing director, heads of various committees and chief of the Islami Bank Foundation, following a board meeting on January 5.

Speaking to reporters at the secretariat yesterday, Muhith said, “It's a pretty serious matter and my impression was very different.”

“The previous president of the IDB, Ahmad Mohamed Ali, brought to my notice some problems with Islami Bank here. So I thought that the IDB carried on the interests. But his successor seems to know nothing about it.”

The minister has asked for a report from the Bangladesh Bank governor on how the changes to the IBBL board took place when the majority shareholders were not party to the decision. Muhith said the governor will inform the finance ministry on the changes at IBBL, as it gave the permission.

Foreign sponsors have majority shares with a 52.16 percent stake in the bank, with the IDB having a 7.5 percent share. The IDB also criticised the way a board meeting at IBBL is convened.

Of late, according to the IDB letter, it has become a normal practice for IBBL to schedule a board meeting on short notice, providing insufficient time to foreign shareholders' representatives to study the board documents and make logistical arrangements to attend the meetings.

On many occasions, the board documents were provided just prior to the meeting. Keeping up with this practice, IBBL sent a notice to the IDB on January 2 for the meeting on January 5.

“As such, regrettably, the IDB representative on the IBBL board could not arrange to attend this important meeting.”

The IDB also voiced its concern about the recent changes at IBBL.

It said the global best practices for corporate governance require that there should be an appropriate process to select the managing director of a systemically important bank like IBBL.

The process involves advertisements for recruitment in renowned newspapers, selection of a committee comprising members of the board to shortlist candidates for interview, and finally, recommending a candidate for the board's consideration.

“It is evident that no such rigorous process was followed for appointing the new managing director of IBBL,” said the IDB.

“Undertaking such important decisions in an abrupt manner, without taking the board into prior confidence, and without following best practices, does not suit well for the reputation of one of the largest commercial banks of the country.”

Bangladesh is the single largest recipient of financing from the IDB Group, according to the letter.

In a statement yesterday, IBBL said notices about board meetings are sent to all board members, both local and foreign, regularly and in time, as per the local laws and the banking regulations. Documents of the meetings are also sent along with the notices.

IBBL also said no exception took place in appointing the new managing director of the bank as the position had fallen vacant and approval was also taken from the board.

“Islami Bank Bangladesh also likes to assure all stakeholders that the country's laws as well as regulations and circulars of the regulators have been followed properly in bringing in the latest changes and this will continue in the future.”