Directors of weak banks can't hold post for 5 years after merger: Cenbank adviser

Directors of weak banks, which will be merged with a strong one, will not be eligible to retain the same post for the next five years, Bangladesh Bank Policy Adviser Abu Farah Md Nasser said yesterday.

"There is a lot of competition to become a bank director in our country. When we merge banks, a fair face value will be determined through functional reporting by the audit firms of both the weak and strong banks," he told a webinar organised by the Institute of Chartered Accountants.

Nasser, also a former Bangladesh Bank deputy governor, further said, "We will then determine the shareholders based on the real value of the assets. The directorship will be approved based on the type of assets they have. But, those who were responsible for the weakening of the bank will not be eligible to be members of the bank's board for the next five years."

The central bank plans to go for forced merger of at least 10 banks by January next year as part of its roadmap to reduce default loans and ensure corporate governance in the banking sector.

Bangladesh Bank Governor Abdur Rouf Talukder shared the plan with leaders of Bangladesh Association of Banks at a meeting held on Monday at Bangladesh Bank headquarters.

Nasser yesterday said, "We need to manage banks well. If a weak bank can strengthen itself on its own, we have no objection. We do not have any plans to force them to merge."

He went on to say, "Bank directors only hold 10% of the capital, while the remaining 90% is held by depositors. Therefore, the central bank's decision will be to protect the interests of the depositors.

"If a bank collapses due to mass withdrawal of money by depositors, there is a risk that another 10-20 banks will collapse within the next week. We will do whatever it takes to protect the depositors' money."

Nasser told the webinar titled "Recalibration of Basel Architecture for the banks to promote economic growth" that banks in the country do not comply with the Basel-3 requirement in their capital adequacy ratio reporting. "Our banks have the opportunity to fully implement Basel-3 by 2026."