JS body for passing banking companies act with no change

A parliamentary body today recommended for passing the Banking Companies (Amendment) Act-2017, which allows the doubling of the number of directors in a bank's board from a single family and extends the tenure of directors.

The parliamentary standing committee on finance made the recommendation in a meeting after scrutiny of the proposed law.

The committee will place its report in the parliament tomorrow, Awami League Lawmaker Abdur Razzaque, chief of the parliamentary watchdog, today told The Daily Star after the meeting at the Jatiya Sangsad Bhaban.

The act has proposed to double the number of directors in a bank's board from a single family and extending the tenure of share-holding directors.

Economists and former central bankers opposed the proposed law saying it would hurt the interest of depositors.

As per the proposed legislation, the tenure of bank directors would be extended to nine years from the current six years. They could become directors again after a three-year hiatus.

Besides, four members of a family would be able to become directors of a bank's board. The number is currently two.

The parliamentary standing committee on finance earlier in a meeting on October had postponed discussion on Banking Companies Act as Finance Minister AMA Muhith was not present there.

Abdur Razzaque at that time told reporters that the standing committee wants to know from the finance minister about the reasons for doubling the number of directors in a bank's board from a single family and extending the tenure of share-holding directors as civil society and banking related persons have been speaking against it.

But talking to The Daily Star, Abdur Razzaque today said: “although I had some reservation regarding the bill, the committee unanimously recommended passing the bill without bringing any change in it.”

He also said as the government wants to pass the bill soon, the committee recommended to pass the bill without any change.

Razzaque also said the bill is likely to be passed in the ongoing session of parliament.

Asked why the standing committee did not hold an elaborate discussion on the bill especially on the provision of doubling the number of directors in a bank's board from a single family and extending the tenure of share-holding directors, Razzaque said the committee members did not oppose any provision of the bill.

Earlier on May 8, the cabinet approved the proposal to amend the Banking Companies Act, doubling the number of directors in a bank's board from a single family and extending the tenure of share-holding directors.

The Banking Companies Act was last amended in 2013 regarding share-holding directors' tenure and how many of a family could become directors.

The 2013 amendments were in line with the advice of the International Monetary Fund and followed international best practices. It came against the backdrop of directors getting involved in irregularities.

After the amendments approved by the cabinet, Mirza Azizul Islam, a former adviser to a caretaker government, told The Daily Star, “This is definitely not desirable from the point of good governance in the banking sector.

“I think the government has surrendered to the pressure exerted by the business lobby. Other than this, I don't find any justification for the amendment.”

The former adviser said if four directors were from the same family, their interest would be reflected in the bank's policies.

On September 12, the Banking Companies (Amendment) Act-2017 was placed in the parliament amid strong opposition from Jatiya Party terming the government move unethical.