IMF wants changes in six sections of Banking Companies Act
An IMF mission yesterday suggested the government amend six specific sections of the Banking Companies Act for getting the second instalment of a $1-billion loan from the lender.
One of the recommendations was to increase the number of independent directors in private banks.
Government officials held a meeting with the IMF team at the finance ministry yesterday.
Fazle Kabir, the finance secretary, led the Bangladesh side, while David Cowen, deputy division chief of the International Monetary Fund in the Asia Pacific, represented the lender.
The IMF mission has been continuing discussions with different government ministries and departments since November 27 on the implementation status of various conditions tagged with releasing the second instalment -- $140 million. The talks will continue till December 6.
A finance ministry official said the IMF mission has demanded amendment to articles of some sections, including 4, 15, 46, 47 and 121, of the Act.
Earlier a technical assistance team of the lender reviewed the existing Act and suggested amendment to several articles and sections.
The IMF team has told the government that if the six specific sections are not amended, the draft Act would not be acceptable, said the ministry official.
However, the government has already finalised a draft amendment to the Act, without changing any of the six sections.
The finance ministry official said negotiations are going on but the government is yet to take any decision on bringing the changes.
Another ministry official said the government has almost agreed to other conditions, tagged with the release of the fund, but has not yet reached any consensus with the IMF on amending the Act.
The IMF mission recommended introduction of a new subsection to require an adequate number of independent directors for every bank. This will ensure that more independent judgment is brought to bear on the decisions of the board.
Under the existing Act, the power of removing the chairmen, directors and other high officials, including the managing directors of state-run and specialised banks, has been kept with the government instead of with the Bangladesh Bank.
The IMF recommended the government should amend the Act, paving the way for the central bank to oversee the state-run and specialised banks like all other commercial banks.
Article 46 of the existing Act says the BB can remove the chairman, any director or official of all commercial banks on charges of irregularities, except for the government-nominated chairman, director or chief executive.
In case of irregularities by any government-picked official, the BB can only submit a report to the government for the latter to consider.
The final draft of the amendment to the Act proposed no changes to that provision other than inserting it in Article 47.
In defence of keeping the provision intact, the draft says the government as the "owning authority should retain the power of abolishing the board of directors of any state-owned or specialised bank".
According to sections 4 and 121 of the Act, the government has the power to suspend or exempt any particular bank from the purview of the Act after consultation with the BB.
The lender recommended vesting the power in the central bank, instead of the government.
The IMF said the act leaves room for political interference in BB's supervisory actions.
Comments