BB Order, Bank Company Act to be reviewed

The central bank is going to review both the Bangladesh Bank (BB) Order and the existing Bank Company Act to ensure corporate governance in the country's banking sector.

"We will update and modernise the BB Order and the Bank Company Act in line with the global practices," Bangladesh Bank Governor Dr Ahsan H Mansur said responding to a question while unveiling the half-yearly monetary policy statement at a press conference at the central bank headquarters in the capital on Monday.

The central bank will review each section of the Bank Company Act 1991, which was last revised in 2023 to make the sections relevant to the situation at the time, according to the central bank chief.

The number of bank directors, the tenure of directors, and the number of independent directors will be strongly focused in the upcoming review of the act, he said.

"We will examine the necessity of having 20 directors on the board of a bank," the governor said, adding the current tenure of bank directors is irrational and should be reduced.

Currently, the maximum tenure of a bank director is 12 years in a row.

Dr Mansur also personally believes independent directors should make up 50 per cent of a bank's board.

"We will also prepare a panel of independent directors to facilitate the hiring of such directors in the banking system from the pool of listed professionals," he noted.

Apart from its own efforts, the central bank wants to seek foreign assistance to update and modernise the Bank Company Act and the BB Order, according to the governor.

Meanwhile, the central bank has advocated the introduction of two pivotal laws in the legislative arena - the Bank Resolution Act and the Deposit Insurance Act (Amendment), according to the latest monetary policy statement (MPS).

The MPS said these legislations are designed to establish a robust framework to resolve, restructure, or liquidate the underperforming banks, directly informed by the outcomes of the Asset Quality Reviews (AQRs).

To further bolster the banking sector's resilience, the Bangladesh Bank concentrates on recovery planning for certain struggling banks, including establishing frameworks tailored for recovery and resolution, it added.

The central bank has also released updated stress-testing guidelines to enhance risk management practices across the banking sector.

"These guidelines encompass conventional risk categories, such as credit, market, operational, and liquidity risks, and have also integrated climate risk stress testing to address potential vulnerabilities arising from natural disasters," the MPS noted.

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