The central bank has tightened eligibility criteria for appointing or re-appointing managing directors (MDs) and chief executive officers (CEOs) in finance companies.
The Bangladesh Bank, in a circular on the appointment rules, has set the maximum age for a finance company's top executive at 65. To become an MD or CEO in a non-bank financial institution (NBFI), a candidate must have a minimum of 20 years of banking experience and at least two years of experience in a senior position before taking on the role.
A circular issued by the central bank's Department of Financial Institutions and Markets (DFIM) states that an NBFI executive's performance in loan default and recovery will be a major issue of consideration before re-appointment.
The guidelines, which have already been sent to all finance company executives for immediate implementation, also said an MD cannot be appointed if the target set for recovering defaulted and non-performing loans has not been met.
The guidelines disqualify individuals with a criminal record, those declared bankrupt by a court, loan defaulters and tax evaders from holding the top management position in an NBFI.
Besides, anyone involved in business entities whose licences have been cancelled and are undergoing liquidation will not be considered for the MD or CEO role in a finance company.
The CEO's contractual term will be three years, with the possibility of re-appointment. But, if the candidate has less than three years remaining until they reach the maximum age limit, they can be re-appointed for the remaining period, subject to approval from the banking regulator.
The guidelines stipulate that MDs and CEOs must apply for BB approval at least ten working days before any scheduled foreign trip. They must also attach official permission from the board of directors of the relevant bank.
The guidelines specify that CEOs will not be eligible for indirect benefits such as dividends on the institution's profits, commissions, overseas medical costs, medical checkup expenses for family members or travel allowances for personal overseas trips.
As the appointment is contractual, the top executives of NBFIs will not be entitled to receive an annual increment, provident fund, gratuity, New Year allowances, superannuation fund or benevolent fund.
Md Kyser Hamid, managing director and CEO of Bangladesh Finance Ltd, said the new guidelines provide clear definitions of the roles and responsibilities of NBFI top executives, which he viewed positively.
"I think this will help ensure accountability among the top executive in the sector," he said.
However, a senior executive from another NBFI, who wished to remain anonymous, said the guidelines restrict many reasonable benefits and facilities while imposing many responsibilities on MDs and CEOs.
"The requirement to apply for Bangladesh Bank approval at least ten working days before any foreign trip, even for urgent travel to see children studying abroad, is a particular cause for concern," the executive said.
"We need to seriously consider this point. Otherwise, it may be difficult to attract qualified candidates for MD and CEO positions in NBFIs," the executive added.
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