A changed rule bars non-banking financial institutions (NBFIs) from sacking their CEOs sans prior permission of the central bank.
Moreover, the Bangladesh Bank (BB) reserves the right to appoint an administrator to stand in the vacancy in CEO post of any of the NBFIs.
To this effect, the BB has amended its rules relating to appointment and removal of the chief executive officers (CEOs) of non-banks, like commercial banks.
Under the amended rules, the authorities of NBFIs cannot force the CEOs to submit their resignation or cancel their appointment contracts without prior approval from the BB.
The CEOs will have to inform the chairmen of the boards of directors of the respective NBFIs about the valid grounds for resignation a month before if they want to break loose from the job contracts voluntarily before the expiry of the agreement, the state bank said in a circular Wednesday.
As per the amendment, a copy of the notice will have to be submitted to the central bank at the same time.
On the other hand, the same process will have to be followed by the boards of directors of the NBFIs if they want to terminate appointment contracts of the CEOs.
In case of the post of a CEO falling vacant, the NBFI concerned has been authorised to appoint an immediate subordinate officer as acting CEO for maximum three months and inform the BB thereof.
The state bank reserves its right to appoint an administrator to the NBFI if the management failed to hire CEO within the stipulated timeframe.
The central bank has made the latest move against the backdrop of seeking job protection by the CEOs of NBFIs so that their boards of directors could not remove or suspend them without concurrence of the BB.
Earlier on March 3, Asad Khan, chairman of Bangladesh Leasing and Finance Companies Association (BLFCA), sough their job protection as in commercial banks to ensure good governance in the sector.
Mr Khan, however, welcomed BB's latest move as he thinks it will help in compliance requirements of the central bank as well as good governance in the NBFIs.
"We're thankful to the BB for taking such initiative," he told the FE.
Earlier on December 23 last year, the central bank amended its rules on appointment and removal of CEOs of commercial banks, prohibiting their sacking sans its prior permission.
Besides, the central bank has also made it mandatory that the NBFIs from now on have to take prior approval from the BB before appointing advisers and consultants.
For such appointments, the justification of the post of adviser and consultant, responsibilities or terms of reference, complete resume of the persons, terms of appointment and copy of board's approval must be submitted to the BB.
"The NBFIs earlier used to inform the central bank after appointing the advisers and consultants," a BB senior official told the FE.
He also said the central bank has amended the rules relating to appointment and removal of the CEOs of the NBFIs aiming to establish good governance in the sector.
Currently, 31 NBFIs are operating across the country.
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