WB wants the SCBs to continue with top management support

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Nazmul Ahsan
The World Bank (WB) has warned that withdrawal of the management support would reverse the gains made by the state-owned commercial banks (SCBs) ---Sonali Bank Ltd, Janata Bank Ltd and Agrani Bank Ltd, in the last three years in terms of performance and profitability.
The multilateral lending agency has strongly recommended extension of the contracts of the Chief Executive Officers (CEOs) and General Managers, currently employed in the SCBs, for another three years up to April, 2013.
The contracts of CEOs and GMs, each appointed for two years, will expire latest by April 2010.
The WB has assured the government of financing the salaries of CEOs and GMs from the ongoing Enterprise Growth and Bank Modernisation (EGBM) project until December 31, 2010. The project is due to expire on December 31 next.
It has suggested the banks to bear on their own the salaries of CEOs and GMs for the remaining two years.
'Discontinuing the ongoing management support to the SCBs at this juncture, where this banks are at the critical point of turning around from loss making to profit generating, and also before the institutionalization of the reforms raises the risks of reversing the gains made in the last three years,' reads a recent communication of the WB, sent to the Bangladesh Bank and the Ministry of Finance (MoF).
'In keeping with the original reform vision, it is recommended that the existing management support to the SCBs be extended for another three years or up to the point of their divestiture.'
'Given that these banks are now operationally profitable, the mission strongly recommends that the costs of the CEOs and GMs be met by the banks themselves from January 1, 2011 and onward", the WB said.
The tenure of the contracts of CEOs and GMs will end by December 2009 in the case of Sonali and Janata and April 2010 for Agrani.
The management support provided through the EGBM project has improved the financial performance and status of these banks, shows the latest data of the BB.
According to the statistics, three banks made a combined operating profit of Tk 13.82 billion in 2008 in contrast to the operating losses incurred previously.
The salaries of CEOs range between Tk 0.6 million and 0.8 million per month, while that of GMs between Tk 0.2 million and 0.3 million, sources said.
However, MoF officials, who are vehemently opposing extension of the management support with the SCBs, have strong reservation about high salaries of CEOs and GMs.
"It is illogical that CEOs and GMs get very high salaries compared to other officials in the banks,' a top MoF official told the FE.
Presently, Sonali and Janata each have four GMs on contractual basis.
However, experts say salaries and remuneration for all staffs of SCBs should be increased to the level of ones in private banks if the government really meant any qualitative changes in the operations of these banks.
"The ministry officials should favour of market oriented salary structures for all staffs in state-owned banks, rather than opposing the current management support,'' a former BB executive director told the FE.
"It would be prudent if regulatory power of MoF on SCBs is transferred to the BB for bringing professionalism in banking and regulation." he added.
The salaries of most CEOs and managing directors of private commercial banks, which have smaller branch networks compared to that of the SCBs, are much higher than those of the contractual CEOs in SCBs, banking sources said.
Officials in the BB said they are in favour of management supports to three banks as the banks lack in expert manpower in almost all tiers due to their unattractive compensation packages.
"The MoF should not think of discontinuing the management support to three banks considering the gains achieved so far in terms of profitability and reduction of the non-performing loans,' a top BB official told the FE.
"It may replace CEOs or GMs failing to perform up to the expectation with efficient people."