BB tightens rules on appointing bank directors

The Bangladesh Bank yesterday toughened rules on the appointment of bank directors and banned willful loan defaulters and tax evaders from sitting on boards as it moves to restore governance in the banking sector.

It came as the central bank brought in a raft of changes to the Bank Company (Amendment) Act, 2023.

The banking industry in Bangladesh is currently going through one of its toughest times as people's trust in them has taken a beating owing to massive irregularities at some lenders, directors' undue intervention, and rising bad loans.

The minimum age limit for directors has been set at 30, according to the central bank's comprehensive regulation issued on the day.

Previously, there was no minimum age for a bank director and a few banks appointed board members who were aged less than 30.

The directors must have at least 10 years of experience in either management and business or have professional experience, according to the amendment.

The work experience before the age of 18 will not be taken into account, however.

The regulation said willful defaulters will be ineligible to become directors for five years even after being excluded from the default list of a bank and financial institution.

Banks will have to appoint a director who is not associated with any company whose registration or licence has been cancelled, the BB said.

The new rules said there must be assurance from the bank that individuals who qualify to become directors were not convicted of a criminal offence or involved in any forgery, financial crime or other illegal activities.

Persons who faced adverse judgements in any case and who were penalised for violating rules will not qualify.

The eligible directors must not have any other profitable position in any other bank, financial institution, insurance company, or the subsidiary of the bank.

Banks can appoint an individual as a director who has never been declared bankrupt by a court. He or she can't be a tax defaulter either personally or on behalf of their sole proprietorship or partnership.

The board of directors will have to be comprised of a shareholder director, a representative on behalf of the shareholder director, independent directors and alternative directors, if necessary.

The number of maximum directors will be 20 while there have to be at least three independent directors.

More than three members from a single family would not be able to hold the position of director simultaneously.

Allowances for directors

Directors will get the highest Tk 10,000 as an honorarium for attendance at board meetings or associate committee meetings, up from Tk 8,000 now.

The directors will be entitled to the honorarium for attending two board meetings, four executive committee meetings, one audit committee meeting, and one risk management committee meeting a month.

Independent directors will get a maximum of Tk 50,000 per month along with the regular allowance, according to the new regulation.

Anis A Khan, an independent director of Trust Bank, described the guideline as comprehensive.

He said the guidelines cited some committees and there are some responsibilities for the bodies. Some compensations are needed for the committee members.