Some restrictions should be imposed on directors of state-run banks:Daily Sun

  Referring to different types of financial irregularities at the state-owned banks, Bangladesh Bank (BB) has advised appointing board directors of the state-run banks based on experience, honesty and competence instead of political consideration to prevent further irregularities at the state banks. The central bank also suggested imposing restriction on the directors’ visit to the banks without a
ny purpose other than a board meeting. Measures have also been suggested against the directors who will recommend in favour of any loan proposal. At the same time, speech delivered by the directors at the board meetings should be recorded and reviewed, the central bank said. Bangladesh Bank also recommended for not to keeping the same person as Chief Executive Officer (CEO) and Managing Director of a bank for longer period of time. The BB also advised to build individual institution for appointing manpower to the state-owned banks and financial institutions. Bangladesh Bank sent a statement containing these recommendations to Finance Minister AMA Muhith on August 27. The finance minister directed Bank and Financial Institutions Division Secretary Dr M Aslam Alam for examining the recommendations made by Bangladesh Bank. Meanwhile, the Bank and Financial Institutions Division has taken an initiative for signing a Memorandum of Understanding (MoU) for regular evaluation of the activities of board of directors of the state-owned banks. Recommending for setting a specific set of responsibilities and jurisdiction of the board of directors, the central bank said the board of directors should be made accountable for sound banking activities as per the banking rules and regulations. At the same, they will take the responsibility for overall business activities, including risk management, internal control, human resources management, operation and administration of the banks, the central bank suggested. Referring to some irregularities took place at state-owned commercial banks, the BB stated that there are a lots information on loans in the accounts book of the banks those don’t exist in reality. Those banks have been disbursing loans without examining the experience of the businessmen and without taking enough security deposit. Ignoring the negative recommendation of credit committee of branches and head office, the board of directors of some state-run banks approved many loan proposals, according to Bangladesh Bank. The central bank statement also said the state-run commercial banks are not following the Bangladesh Bank guidelines and their own loan policies. Those banks have been approving loan even before receiving the Credit Information Bureau (CIB) report. In many cases, the state-owned banks are distributing loans even after knowing that the loan will turn default. Despite arrears, the banks are renewing loan proposals violating the rules and regulations. The central bank said the board of directors of the state-owned banks did not play a remarkable role for formulating policy for eradication liquidity-related risks. They also showed a large number of un-reconciled wealth to the foreign book of the bank, which has been influencing actual wealth and risk of the bank negatively. Fund fraud and irregularities have been taking place at the banks since head offices of the banks have no control over the net accounts of the banks. introduction of Key Performance Indicator (KPI) for controlling irregularities at the state-owned banks, Bangladesh Bank said the board of directors should formulate their respective banks’ annual work plan. Central bank’s policies for approving loan proposal and risk management should be followed. Different cases should be reviewed on monthly basis and liquidity position and loan recovery status of the banks should also be reviewed every month, the central bank suggested. BB also recommended for enhancing banks’ rating standard, maintaining capital and ensuring sufficient capita base and ensuring implementation of the board’s decisions. The BB also suggested for not appointing similar person in different manner after their retirement in order to reduce irregularities at the state-run banks.