10-year experience a must to become director of state banks

Highlights

• No director can serve more than three consecutive terms
• A person cannot be the director of more than one bank or financial institution
• One-third of the directors of govt banks and financial institutions will be women
• A selection committee led by the secretary of the financial institutions division will be formed

No one can be a chairman or director of a state-owned bank without at least 10 years of administrative, managerial or professional experience, according to a circular of the Financial Institutions Division of the Ministry of Finance.

A person holding more than 20% of the shares of any bank or financial institution cannot be a director of a government bank or financial institution, it said.

The circular was issued on Thursday to formulate a policy fixing the qualifications of the chairmen and directors of state-owned banks and financial institutions. It will also be applicable to private banks or financial institutions with government shares.

People concerned say the policy will reduce irregularities in appointing high officials to the banks' boards. It will also help prevent the appointment of persons based on their political affiliation.

The policy stated that one-third of the directors of government banks and financial institutions will be women. Besides, each board must have at least one chartered accountant, one banker and one member with legal expertise such as a retired district judge or deputy attorney general.

A person cannot be a director of more than one bank, financial institution or insurance. Moreover, a person cannot be a director of an institution in case of holding a post in the same institution in the last five years or working as an advisor or consultant to any other bank.

Persons with knowledge of economics, banking, financial market, monetary policy, financial management and other related issues will be prioritised for the appointment of directors.

To appoint a director or chairman, a selection committee led by the secretary of the financial institutions division will be formulated. The other members of the committee will include an additional secretary of the division, a joint secretary of the finance division, and an executive director of the Bangladesh Bank.

The approval of the prime minister must be taken for the appointment or re-appointment of the chairman. In case of appointment or re-appointment of the director, the approval of the finance minister should be taken, as per the policy.

The tenure of the directors of state-owned and private commercial banks, specialised banks, and financial institutions will be a maximum of three years. No director can serve more than three consecutive terms. However, after serving three terms, a director shall be eligible to be appointed in the same post again after a gap of three years.

Salehuddin Ahmed, former governor of the central bank, said that overall the policy has been good. "However, it mentioned the considerations of the government in appointing experienced professionals as directors. Due to this provision, persons with affiliations of the ruling party will take the opportunity to be appointed to the banks' policy-making positions," he said.

Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, told The Business Standard that it will be hard for the selection committee to maintain impartiality in appointing chairmen or directors.

"It is difficult for incumbent bureaucrats to act impartially. The selection committee could include former governors, experienced bankers or former secretaries. The secretary of the financial institutions division or his representative could be in charge of the member secretary of the committee. This would make it easier for the selection committee to select the chairman or director," Ahsan H Mansur said.