Dhaka,  Sunday
14 April 2024

Bank MDs no more can get away with anomalies

Saifullah Aman

Published: 13:01, 4 March 2024

Bank MDs no more can get away with anomalies

Photo : Messenger

Bank managing directors (MDs) will no longer be exempted from accountability for any irregularities within the bank as Bangladesh Bank (BB) has enhanced their job security.

Following a latest BB move, the banks’ board of directors will no longer have the authority to change them at will. The central bank has already issued several notifications guaranteeing the job of MDs and chief executive officers (CEOs), upon which the BB has underscored that the MDs will no longer be exempted from responsibilities with regard to irregularities.

The MDs are, henceforth, mandated to take responsibility for all types of irregularities – thereby signaling a stricter enforcement of accountability measures.
The Daily Messenger talked to at least four bank MDs regarding the BB move. While talking, the MDs have revealed that they have recently received verbal instructions from the BB governor regarding the changes in protocol.

Speaking on condition of anonymity, the MD of a leading bank stated, "The board of directors previously had the authority to replace an MD at their discretion. The BB only needed to be informed to this effect. However, from now on, the dismissal of an MD will require prior BB approval, along with a detailed explanation for the decision."

Additionally, if an MD chooses to resign, they will still be held accountable by the BB, and resignation or dismissal will only be accepted with the central bank's approval. This new framework for job security is expected to empower the bankers to be more proactive.

Nevertheless, the BB has emphasised that the MDs will now bear responsibility for any irregularities within the bank. They will face consequences for all offences, including involvement in anonymous loans and internal irregularities.

Economist Dr. Ahsan H. Mansoor applauded the BB decision. While talking to The Daily Messenger, the Executive Director of Policy Research Institute (PRI), who was also the chairman of BRAC Bank previously, said, "The responsibility must lie with both the bank management and the relevant board. Otherwise, a bank can never run well. It is not just about asking bankers to work fearlessly. Now the board may not be able to fire, but it can keep it ineffective. If an MD is incapacitated, then the board can take any action. Therefore, the BB should play a more active role in this regard.”

He went on saying, “The reasons for which the board indulges in conflict with bank management should be brought before the people. In this case, BB should also think about good governance. Many issues are solved by BB these days in an unethical way. There must be an end to these. Above all, the bank management should stand straight keeping its back right. Only then will there be transparency in this sector.”

A directive of the central bank recently said if the MD or CEO of a bank is to be deposed or if the person wants to resign voluntarily, then it is not enough to notify the central bank. Rather, the decision should be taken with the approval of the BB from now on.

The central bank has announced new policies by canceling all the previous policies for the post of MD and CEO, stating that there are more challenges to deal with business and technical risks than before in the management of bank companies.

In the recently-issued policy, the BB has established new criteria and provisions for the qualifications and privileges of bank MDs and CEOs. According to the BB policy, individuals with any financial interests related to the organization or their family members cannot hold the position of MD in commercial banks.

The new policy mentions the job security of MDs and CEOs and says that no chief executive officer can be removed before the contract expires or the contract can be terminated unless he commits gross moral lapses or deviant acts. If the CEO requests to resign for personal or other reasons before the expiry of the contract, such request should be sent to the BB with the recommendation of the Board of Directors.

At a later date, the appointed committee of Bangladesh Bank will take a personal hearing of the resigned MD. It is mentioned in the policy that the decision of Bangladesh Bank will be considered as final.

Similarly, even if someone wants to resign voluntarily or for personal reasons, the Central Bank has said in the new policy that the Bangladesh Bank must approve.
Besides, if the post of MD or CEO in a bank is vacant for more than three months, the central bank can appoint an administrator. The appointment and promotion of all officers and employees other than the next two levels subordinate to the MD or CEO will be vested in the MD or CEO, the central bank said.

Seeking anonymity, a deputy governor of Bangladesh Bank told The Daily Messenger, "Bangladesh Bank does not need any assurance beyond the issues that have been notified." Following these instructions, bankers can now work safely. No more pressure from the board of directors or influence from anyone else can be excused. From now on, the MDs will be responsible for all the irregularities of the bank.

An MD of a leading private bank told Messenger on the condition of anonymity, "What is meant by job security has been confirmed in the recent notification. It is commendable that Bangladesh Bank is implementing our long-standing demand. However, the MD can't prevent all the irregularities of the bank. As freedom of action is given to MDs, powers to punish any officer should also be given. Otherwise, all the employees of the bank cannot be brought within the guidelines.”

The managing director of another bank said, "It is a relief that we have been assured of employment." By doing this, there will be no possibility of major irregularities. There will be some minor irregularities, which can be resolved by the banks on their own. Besides, the good governance of the bank will be ensured.

The managing director of an Islamic-based bank said, "It deserves praise. Almost all the cases of loan irregularities that have occurred in the country so far have been caused by the pressure of the board members. MDs also had a role in some cases. However, the investigation revealed that this was done at the request of the board of directors.” 

“So far, no person on the board has been punished in all the cases of irregularities. All the bankers were punished. Recently, a former MD was also sent to jail with a sentence of several years. So, the bankers are being punished in advance. But the change that will come now is that the bankers will not be able to make loan irregularities under any pressure.”

In this regard, BB Spokesperson and Executive Director Md. Mezbaul Haque told The Daily Messenger, "The regulatory body of the banks is Bangladesh Bank. The central bank is also responsible for checking the good and bad of the banks. The influence that the board of directors could wield for so long is no longer possible. Now no MD can say that he has done or sanctioned any irregularity under any pressure or influence. Apart from job security, punishment is also mentioned. It is expected to balance the employment sector.