Proposed amendment to massively change bank board formation

Bangladesh Bank governor Dr Ahsan H Mansur has said the proposed legal changes are vital for enforcing governance in the banking sector through management streamlining, and expects government approval shortly.

The proposed amendment to the existing Bank Company Act passed through the ministry concerned, he told journalists Thursday, on a note of optimism that it might get government's seal of approval within this month.

"It's now under the government consideration. We expect the government will take decision regarding the matter within this month," the BB governor told the reporters in an emergency press briefing meant to dispel any confusion.

Once the amendment is passed, he said, there will be some massive change in terms of formation of bank board.

"Some quarters might not like it but the proposed changes in the existing Bank Company Act are needed to ensure good governance in the financial sector," he said.

According to the draft, the number of directors will be reduced. Family directorship in the banks will be curtailed to two in place of five and their tenure will be three years in each of two terms.

Now a family director can stay on the bank board twelve years in a row, according to the latest Bank Company Act amended in 2023.

And 50 per cent of the directors must be independent and independent directors will be chosen from the BB-drawn panel, according to the drafted amendment.

The emergency press meet was arranged by the central bank to clarify the recent instructions to the five merged banks regarding giving no profit against the deposits in these banks for two calendar years - 2024 and 2025.

Under the principles of Shariah-based banking operations, the governor said, the depositors will not get any profit for 2024 and 2025 as the banks incurred huge losses in these calendar years.

"The decision is taken based on shariah principles," he told the press.

However, the depositors will get profits until the calendar year of 2023, according to the BB rulings.

The banks--First Security Islami Bank, Social Islami Bank, Union Bank, Global Islami Bank, and EXIM Bank--are being merged into a new state-run one styled Sammilito Islami Bank PLC.

In letters recently sent to the banks, the central bank said deposit balances would be recalculated based on their position as of December 28, 2025. No profit will be considered on deposits for the period from January 1, 2024 to December 28, 2025.

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