The government has approved amendments to three provisions of the Bank Company Act, including increasing the tenure of the board of directors of a private bank from six years to nine years.
The amendments, proposed by the Financial Institutions Division, were approved in a cabinet meeting on Monday.
Cabinet Secretary Mohammad Shafiul Alam said as per the amendment to a second provision, the elected chairman, directors and the managing director of a private bank will require the consent of Bangladesh Bank prior to assuming office. In the current law they have to seek permission from Bangladesh Bank before participating in the election.
He also said the Bangladesh Bank will not cancel the appointment of a chairman, a director or an MD of a bank but it will give its observations about the appointment.
The change to a third provision states that up to four members of a family may be appointed as board of directors for a bank, while the law currently permits only two members from one family.[caption id="attachment_62222" align="aligncenter" width="800"] A cabinet meeting on May 8, 2017 approves the changes to the Bank Company Act PID[/caption] Shafiul said: “The government has approved the changes to suit the demands of the nation’s private banks. “The logic behind that amendment that the sponsor directors are not benefited from existing tenure of board of director of private banks.” Outside directors get the financial benefit from the bank and then leave, he said. “Only time will tell if the amendments to the act are good or bad for the banking sector,” the cabinet secretary said. Bank owners platform Bangladesh Association of Banks (BAB) members said the law regarding the six-year tenure of a director may be applicable to directors coming from the outside, like independent directors, appointed directors or ex-officio directors. The sponsor-directors will be deprived of their right to wealth or property if the law is applied to them as well, the association said. Since the sponsors have invested their money to make up the paid-up capital of the bank, it would not be judicious to deprive them of their position and wealth simultaneously, BAB said. The BAB also proposed amendments to the definition of family in the law. Under the act, family means spouse, parents, siblings, children and any person dependent on the sponsor director. But the BAB says if the person is elderly and fully independent or has separate business, they should not be counted as family.