In 2013, the government amended the act restricting to maximum two the number of directors from a family in the board of directors of a bank to check irregularities and indiscipline. The mandatory requirement to get approval from Bangladesh Bank for appointing directors to the board might also be relaxed in the proposed amendment to the act, said the officials.
The government might bring about another change to the act allowing a director to serve maximum nine years in a bank’s board of director instead of the existing six years. Experts said that the proposed changes were contrary to good governance in the banking sector that already suffered from bad loans and loan scams. Bank and Financial Institutions Division Secretary said that they were directed by Finance Minister to prepare a bill seeking some amendments to the act. In October 2016, the Bangladesh Association of Banks submitted demands for the amendment to the act at a meeting with the Finance Minister.
Increasing the number of family members further increases the chances of nepotism and bad governance — essentially letting members of a family run unchecked in their operations of running a bank. This cannot be good for the governance of any bank or other financial institutions as it would let the dictates of one family, which could be arbitrary, be a doctrine for running an institution which would have access to public funds from individuals who think that they can safely reside their excess capital in such an institution.
Similarly, increasing the tenure of directors would entrench corruption by allowing the same old player do whatever they want with a banks funds. Getting approval from Bangladesh Bank should be a crucial step towards the vetting of directors to ensure that they are professionals who can be entrusted with public funds and are not people who will drag down the bank with a slew of bad loans and destroy the capital base.
There is no earthly reason why the proposals from the banking association should ever be put into law as it would severely deteriorate the already dismal level of professionalism which exists in our local banks. Funds have flown out from public run banks towards private ones — a degradation of professionalism will further the shift to foreign banks. This cannot be a good solution for our banking system.
