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Not more than 3 bank directors from a family

Staff Correspondent
26 Jul 2023 19:11:50 | Update: 27 Jul 2023 00:21:57
Not more than 3 bank directors from a family

In line with the latest amended Bank Company Act, Bangladesh Bank (BB) has asked banks to bring down the number of directors from the same family to three from four.

The maximum number of board of directors from the same family is now restricted to three, whereas it was previously set at four.

The decision regarding who will resign should be reached through mutual agreement among the directors. If they fail to reach a consensus, the central bank has instructed them to determine it through a lottery process.

Banking Regulations and Policy Department (BRPD) of Bangladesh Bank has issued a circular in this regard on Wednesday. The circular does not specify any time limit for such resignation.

However, the circular stipulates that the number of directors from the same family must be reduced from four to three, and this adjustment should be reported to BRPD Division-2 within the shortest period of time.

When asked about the deadline of resignation, an official of the central bank told The Business Post that, the circular issued on July 24 said that the banks have to notify the Bank-Company (Amendment) Act-2023 in its next board meeting.

The resignation of the additional director from the same family will definitely be a topic of discussion in the upcoming meeting. In that case, the official thinks that the issue (resignation of a director) will be resolved after the next meeting, he added.

The circular issued on Wednesday said, under Section 15 (10) of the Bank-Company Act-1991 (Amendment 2018), no more than four members from a single family can hold the directorship of a bank at the same time.

This number has been brought down to three by amending in the Bank-Company (Amendment) Act-2023. In such a case, a director from the same family on the board must resign to fulfil the new law, asked the BB circular.

The latest amendment to the Bank Company Act cut the number of directors from the same family, but extended the tenure of directors from 9 years to 12 years.

Meanwhile, if one company within a group defaulted, it affected the loan eligibility of other companies in the same group.

However, with the latest amendment, all companies within group will now be eligible for loan facilities regardless of the default status of any single company.

Experts criticised that this type of amendment is likely to exacerbate the lack of good governance in the banking sector, thereby adversely impacting the country's economy.