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National Bank board has been dissolved on grounds of overriding regulations and poor governance that resulted in quick deterioration of the bank's financial health, officials said.
Bangladesh Bank (BB) Thursday ordered the dissolution the board of directors of the liquidity-strapped National Bank Limited (NBL) in a correctional measure "to protect interests of the depositors".
The banking regulator cited lending in breach of rules, undue management interventions and controlling bank shares by "same family" among the grounds for the management change of the private commercial bank.
The latest move on a latest bank-management change comes on recommendation from the capital-market regulator, Bangladesh Securities and Exchange Commission (BSEC), the sources said.
Spokesperson for the central bank Md Mezbaul Haque said the BB dissolved the existing NBL board because it failed to protect interests of the depositors and its financial health from a gradual fall.
"Instead, the BB formed a new board appointing former professor of the Institute of Business Administration (IBA) at the University of Dhaka Dr Syed Ferhat Anwar as its chairman," he said.
The other members of the 7-mmeber board are Bangladesh Bank's former executive director Sirajul Islam (independent director), former managing director of Southeast Bank Md Kamal Hossain, Khalilur Rahman (a sponsor director of the dissolved board), Parveen Haque Sikder, Shafiqur Rahman (nominated director of the bank from Sikder Insurance Company) as directors while Moazzem Hossain will play the role of sponsor director, he said.
The central bank has already handed over the order to managing director of the bank Md Mehmood Husain, said Mr Haque, also an executive director of the BB.
In the latest management shakeup, Zakaria Taher along with Parveen Haque Sikder's mother, Monowara Sikder, and brothers Rick Haque Sikder and Ron Haque Sikder have been dropped from the board.
They were shareholder directors of the beleaguered bank.
Two independent directors-Md Naimuzzaman Bhuiyan Mukta and Murshid Kuli Khan-also have been delisted.
According to the BB order, the decision was taken under sections 47(1) and 48(1) of the Bank Company Act 1991 (amended in 2023) following recommendation from the capital-market regulator as the bank's just- ousted board "continued approving loans in breach of due rules and regulations, did unexpected interventions in banking management and controlling shares of the bank by a same family through misuse of the board's powers".
Seeking anonymity, a BB official said the directors on the immediate- past board were found involved in various financial irregularities and the bank's financial health kept waning fast "because of the policymaking weakness of the board that put interests of the depositors at great risk".
"That's why the central bank dissolved the board to protect the depositors," the official added.
The NBL hit media headlines in recent times as the major fundamentals of the commercial lender kept weakening alarmingly, which becomes a matter of serious concern to the regulator.
According to the statistics of the central bank, the advance-to-deposit ratio or ADR increased alarmingly to reach 101.23 per cent until October in 2023 against the ceiling of 87 per cent for a conventional bank.
The ratio was 95.66 per cent and 94.12 per cent in 2022 and 2021 respectively.
The volume of non-performing loans rose to 35.90 per cent at the end of October last--a significantly rise from 25.36 per cent and 13.45 per cent recorded in 2022 and 2021--the BB data showed.
On the other hand, its capital shortfall, another key indicator to assess the financial health of any financial institution, had jumped over Tk 33.0 billion by October this year.
The figures were Tk 1.85 billion and Tk 4.57 billion in the previous two calendar years of 2022 and 2021 respectively.
As a result, the once-profitable first-generation private bank stepped into the negative territory in very recent years as its net loss stood at Tk 9.31 billion, as of October 2023. The volume of net loss was calculated at Tk 9.89 billion in 2022 although the bank made net profit of Tk 1.44 billion in 2021.
Simultaneously, the bank had deficit in maintaining SLR from September last year while the accumulated shortfall in maintaining CRR rose over Tk 35.0 billion.