Some 80 percent of the banks and 88.9 percent of the non-bank financial institutions (NBFI) have no performance evaluation of their boards, a study revealed yesterday.
The study found only 15 percent of the banks and 11 percent of the NBFIs have had a performance evaluation system and five percent of the banks refused to respond to the issue.
“Performance evaluation is critical to increase the efficiency of a board. Such evaluation gives proper direction to management to counter possible risk and to improve the performance of any organisation,” said the study, conducted by Bangladesh Enterprise Institute (BEI) and placed before a seminar yesterday.
The two-day-long SAARCFINANCE seminar titled “Corporate governance in banks and financial institutions” was organised jointly by Bangladesh Bank (BB) and BEI in the capital. SAARCFINANCE is a network of Saarc central bank governors and finance secretaries to share experiences on macroeconomic issues.
BB Governor Dr Salehuddin Ahmed chaired the inaugural session of the seminar.
Salehuddin said good corporate governance in banks and NBFIs helps financial stability and accelerates economic growth.
He lamented that very few banks and NBFIs have written code for corporate governance, which is necessary for Basel II implementation.
“Unless you (banks and NBFIs) have a guideline, it is difficult to practice corporate governance,” he said.
BEI Project Director Lopa Rahman presented the study at the seminar.
She said the main objective of the study was to determine the corporate governance awareness and practices among the banks and NBFIs. The study covers seven major categories that include general information, commitment to corporate governance, board, audit committee, transparency and disclosure, training and opinion regarding good corporate governance.
About 15 percent and 33.33 percent of the total respondents from banks and NBFIs respectively reported that they have some understanding on corporate governance.
It was found that 39 percent respondents from the banks and 55.56 percent from NBFIs ranked accountability as the number one element of corporate governance.
The study finds 15 percent of the banks and 22.22 percent of the NBFIs have a written corporate governance code. Majority of the banks and NBFIs have written human resource policies.
It also revealed that 20 percent of the boards of banks and 55 percent of NBFIs have independent directors on the board. Some 50 percent of the banks do not have directors' job description.
The BEI study found that only 10 percent of the banks and one-thirds of the NBFIs have designated corporate governance persons.