Dr. Atiur Rahman
Governor, Bangladesh Bank :
Attaining high quality of corporate governance is important for creating and maintaining investor confidence in corporate businesses and much more so for banks as they are highly leveraged and engaged in risk bearing investments with depositors’ funds in a fiduciary role. The 2008-2009 global financial crisis is still vivid in memory as example of corporate governance failures in banks precipitating global scale systemic collapses in chains of contagion across institutions and markets with linked exposures.
Like other banking regulations and standards, banking sector corporate governance best practice guidelines formulated by Basel based global expert committees are undergoing revision; online consultation round on a revised set of corporate governance principles for banks issued in October 2014 have closed earlier this month. The existing corporate governance regulations and guidelines in Bangladesh as outlined in Deputy Governor Shitangsu’s keynote presentations are ongoing work in progress evolving in line with the Basel global best practice standards, adapted appropriately to the specifics of our local environment. Our economy’s steady six plus percent annual average real GDP growth for well over a decade now amid prolonged global growth slowdown and not too infrequent domestic disruptions outpace global growth by substantial margin; and our banking sector growing in tandem needs to consolidate and strengthen its capacity of mobilizing massive new volumes of domestic and external financing to meet the economy’s expanding financing needs.
Rising up to this challenge will require our banking community to aspire for urgently elevating its corporate governance practices to standards that are nothing short of excellence. Governance related clauses of Companies Act, the Bank Companies Act and the attendant regulations and guidelines from BSEC and BB are being revised and updated continually in line with evolving needs; but these are merely the minimums in required standards and should be exceeded rather than barely met. Bank directors and senior managements must bear in mind that good corporate governance is more a culture to be fostered spontaneously by the corporate business community rather than a discipline to be enforced coercively by the regulators.
Corporate governance lapses precipitating the last global financial crisis came about largely from aberrant motivations of errant bankers going out on their limbs for quick gains from speculation and mis-selling of opaque, inappropriate financial service packages at the cost of longer term institutional viability. We at BB have therefore gone about setting the motivations oriented in the right direction alongside overseeing compliance with corporate governance related laws, regulations and guidelines. Our financial sector Corporate Social Responsibility (CSR) mainstreaming initiative taken up in 2008 at the onset of the global financial crisis is now a full blown initiative of ingraining socially and environmentally responsible financing in the corporate ethos of Bangladesh’s financial sector. I am deeply gratified that all banks and financial institutions of all descriptions, state owned and private, commercial and specialized, local and foreign are fully on board with us on this without demur.
I look forward to the same commitment and proactive engagement of BAB and ABB, the forums of bank owners and senior managements, towards forging and deeply ingraining the culture of corporate governance excellence in terms of clarity in roles, responsibilities and accountabilities, risk management capabilities, transparency, and fair treatment of all stakeholders including depositors, minority equity holders and other creditors. The uncomplicated, fairly straightforward corporate structure of banks in Bangladesh is a convenience for their boards and senior managements in fostering high quality corporate governance, positioning them well for major expansion breakthroughs in local and external markets. BB has been and will continue to remain forthcoming with guiding hand and supporting infrastructure like the IT platform already in place for online reporting and data base access. Setting up a world class Centre for Leadership Excellence in the Financial Sector (CLEFS) in Chittagong is in progress which will primarily focus on issues related to better corporate governance in the financial sector. We hope to bring in world class experts to raise the quality of discourses on the desired corporate governance excellence.
Admittedly, our broader governance environment has many impediments on the path towards financial sector’s governance excellence; like indulgent laxities and delays in taking wrongdoers in loan scams and fraudulences to judicial processes, and abuse of process loopholes in delaying legal redress. Undesirable as these are, such situations are not altogether infrequent in developing economy environments. Rather than inaction and despondence about these, it is high time for our financial sector to engage determinedly and in unison to confront and do away with these impediments; and more importantly to build up corporate governance excellence as the key preventive safeguard.
