The New Nation - Internet Edition

Pulack Ghatack

A major reshuffle in the boards of various private sector banks is in the offing and some 130 bank-directors is expected to be dropped from their respective boards by October 2008 to comply with the amended Bank Company Act.

More than half of the country's private banks would either have to appoint new directors or thoroughly rearrange their boards after October next year as the amended banking law limits the number of directors to 13 only and restricts the tenure of a director to two consecutive terms (three-year term each), sources in the Bangladesh Bank said.

Al-Arafah Islami Bank will top the list with 21 directors being removed, while it would be followed by United Commercial Bank Limited (UCBL), which is to remove 19 directors. Al-Arafah, UCBL, Pubali, Premier, City and SIBL banks would have to reconstitute their boards entirely before October 2008.

The Act, promulgated in October 2007, also says that a family having above 5.0 per cent shares in a banking company is entitled to have not more than two directors on its board, and a family having less than 5.0 per cent shares is able to hold one post of director.

Parents, husband and wife, children, brothers and sisters and their dependants are considered members of a family.

The President promulgated the Bank Companies (Amendment) Ordinance 2007 in last October the draft of which was approved by the Council of Advisers in July updating the Bank Companies Act 1991 in order to streamline the banking sector.

Managements of banks welcomed the Caretaker Government's move, which they said, would help ensure good governance in the banking sector. They said that the amendments would help the authorities to operate the banks more professionally.

The owners, on the contrary, pleaded that this Act will weaken the boards of banks due to forced exclusion of experienced members.

The BB in a circular on 5 November this year instructed commercial banks to comply with the amended clauses regarding directorship and chief executive officer.

The central bank on the same day also asked commercial banks to raise their capital to Tk 200 crore by June 2009, in compliance with the Bank Company (Amendment) Act, 2007. The banks will have to increase half of the capital of Tk 100 crore by June 2008 and the rest by June 2009.