Govt to amend Bank Companies Act by first half of 2011: Muhith

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FE Report
The government will amend Bank Companies Act by early next year as part of an ambitious plan to reform legal frameworks that regulate the country's corporate world, the Finance Minister said Saturday.
"We realize the need for regulatory reforms in the corporate governance to bring more consistency and coherence between various legal frameworks governing the corporate bodies", AMA Muhith said.
The minister said the government "is working to bring out necessary reforms in all existing corporate legal frameworks" including the laws that regulate the country's banking system.
"At present, we are moving rapidly to amend the Bank Companies Act and hopefully the law will be up for modification by the first half of 2011", Muhith said.
The Bank Companies Act dates back to 1991, with some amendments being made twice in 1993 and 1995. The Act governs the country's 47 private and public banks.
Muhith made the comments during the launching of the Corporate Governance Report on Standards and Codes (ROSC) in the city. The World Bank prepared the report this month.
He cautioned that majority of these age-old corporate regulatory frameworks may need more time to amend due to technical difficulties.
"The Companies Act of 1994 and the laws regarding Securities and Exchange Commission would need longer time to amend due to longer paperwork", he said.
"Much of these corporate legal frameworks are based on age old British and Pakistan period legislations and would be much difficult to address", he added.
Muhith was also critical of the absence of 'corporate governance culture' in the state-owned enterprises and lamented the "lack of active cooperation and understanding between the government and corporate bodies".
"I doubt whether the culture of corporate governance exists at all in the state-owned enterprises", the minister said, adding, "This has affected performance and output of the SOEs drastically".
"At the same time, our private sector often tends to act with utmost independence and autonomy while expecting a spoon-fed assistance from the government", he added.
The Finance Minister called for a more active approach from the SOEs and private sector in implementing stronger corporate governance culture in the country.
"Strong corporate governance and regulatory framework ensures ideal business environment and adequate flow of investment in the country", Muhith said.
Later speaking on the occasion, Bangladesh Bank Governor Dr. Atiur Rahman stressed demand-driven corporate regulatory reforms in the private sector.
"Regulatory reforms in the corporate sector in the near future should not be supply-driven but rather should be demand driven", Atiur said.
"In the near future, the business chambers and corporate bodies should come forward with effective recommendations to bring necessary changes in the corporate governance structure", he said.
The BB governor also said the central bank would bring more efficiency and transparency in the financial sector through instant availability of relevant documents and information through the use of technology.
"Currently we are working to put all the Credit Information Bureau (CIB) reports online by next month and the website will be fully operational by the end of this year", the Governor said.
Earlier, the outcome of the recent World Bank Report on "Observance of Standards and Codes (ROSC): Corporate Governance Country Assessment of Bangladesh" was unveiled at the event.
According to the report, the capital market in Bangladesh is one of the most underdeveloped in the region, where shareholders do not have sufficient rights regarding related party transactions and the basic legal framework for corporate governance is dated.
"Greater independence and professionalism is required in the boardrooms of listed and state-owned enterprises", said David Robinett, Private Sector Development Specialist of World Bank and lead author of the report
He added, "the registrar should undergo comprehensive reform while the effort to improve and auditing should be accelerated".
World Bank Country Director Ellen Goldstein said although Bangladesh has made significant progress in strengthening its stock market and corporate governance structure, the country is also gradually lagging behind compared to others in the developing world.
"There is a great lack of consistency between the laws governing the banks, companies and the Securities and Exchange Commission", said Mirza Azizul Islam, former finance adviser.
"At the same time, the share and participation of SOEs in the capital market is ignorable despite their wide business portfolio", Mirza, who is also an ex-Chairman of SEC, added.
President of Bangladesh Enterprise Institute (BEI) Farooq Sobhan, President of ICAB Jamaluddin Ahmed, President of Dhaka Stock Exchange Shakil Rizvi and Ambassador of Netherlands in Bangladesh Alphons Hennekens also spoke on the occasion.