Draft act enhancing BB's role in good governance okayed
Wednesday, 29 August 2007
FE Report
The caretaker government has approved some amendments to the Bank Companies Act 1991, which will strengthen Bangladesh Bank’s (BB) monitoring and supervisions aiming to ensure good governances in the banking sector.
The Council of Advisers of the caretaker government Tuesday gave its approval to the draft Bank Companies Act 1991. Chaired by Chief Adviser Fakhruddin Ahmed, the meeting also approved the proposal for signing a memorandum of understanding (MoU) with India on export of eight million pieces of apparel items, which will be free of import duty under South Asian Free Trade Agreement (SAFTA).
The President will now issue an ordinance -- Bank Companies (Amendment) Ordinance 2007 -- for implantation of the rules and regulations for bank companies.
The government took the move to bring changes in the definition of default loan and the number of the board of directors tightening measures against default loans and restricting the tenures of bank directors.
Besides, the amount of total capital of the banks will be doubled to improve financial health of the country's banking system.
Under the new amendments, the definition of 'Bank' has been specified so that except for Bank Companies no other company can use the term 'bank' to mislead people.
"In consultation with the government, if necessary, the Bangladesh Bank (BB) can change the amount through government gazette notification," says the statement on objective of the amended law.
Bankers welcomed the amendments, saying that it would bring positive changes in the country's banking sector.
"The amendments to the act will help establishment of corporate governances in the country's banking sector," a BB senior official told the FE.
The central bank, under the proposed amendment, will reduce the duration of overdue period of loans to three months from the existing six months time in line with the international standards.
"The existing amount of total capital for commercial banks will be doubled under the amendment aiming to increase the capital-base of the banks," he said, adding the central bank recommended doubling of the amount in line with the BASEL-II.
The amendment proposes a rise in the total capital of commercial banks to Tk 2.0 billion from the existing Tk 1.0 billion
Bangladesh is planning to implement the Basel-II framework for bank companies from early 2009 in line with the global standard.
The new Basel accord has been prepared on the basis of three pillars: minimum capital requirement, supervisory review process and market discipline.
According to the amendments, the board of directors of a commercial bank will consist of no more than 13 directors and their tenures will be restricted to two consecutive terms (three-year term each).
A family having above 5.0 per cent shares in a banking company would be entitled to have not more than two directors on its board, and a family having less than 5.0 per cent shares would be able to hold one post of director.
Parents, husband and wife, children, brothers and sisters and their dependants would be considered members of a family.
"It is under process of implementation. The new rules will be good for banking system in Bangladesh," Managing Director and Chief Executive Officer of the Agrani Bank Syed Abu Naser Bukhtear Ahmed told the FE Tuesday night.
The amendments will help the authorities operate the banks more professionally, a senior banker observed.
The council meeting also approved an amended proposal on policy guideline of the government for purchase of electricity from Captive Power Plants (CPP) of private owners.
Under the policy guidelines the government can purchase per-unit electricity at a maximum rate of Tk 2.23 from the CPPs. It also extends the period of agreement with a CPP to three years from six months.
The meeting also reviewed the post-flood rehabilitation programmes in the flood-affected districts.
The caretaker government has approved some amendments to the Bank Companies Act 1991, which will strengthen Bangladesh Bank’s (BB) monitoring and supervisions aiming to ensure good governances in the banking sector.
The Council of Advisers of the caretaker government Tuesday gave its approval to the draft Bank Companies Act 1991. Chaired by Chief Adviser Fakhruddin Ahmed, the meeting also approved the proposal for signing a memorandum of understanding (MoU) with India on export of eight million pieces of apparel items, which will be free of import duty under South Asian Free Trade Agreement (SAFTA).
The President will now issue an ordinance -- Bank Companies (Amendment) Ordinance 2007 -- for implantation of the rules and regulations for bank companies.
The government took the move to bring changes in the definition of default loan and the number of the board of directors tightening measures against default loans and restricting the tenures of bank directors.
Besides, the amount of total capital of the banks will be doubled to improve financial health of the country's banking system.
Under the new amendments, the definition of 'Bank' has been specified so that except for Bank Companies no other company can use the term 'bank' to mislead people.
"In consultation with the government, if necessary, the Bangladesh Bank (BB) can change the amount through government gazette notification," says the statement on objective of the amended law.
Bankers welcomed the amendments, saying that it would bring positive changes in the country's banking sector.
"The amendments to the act will help establishment of corporate governances in the country's banking sector," a BB senior official told the FE.
The central bank, under the proposed amendment, will reduce the duration of overdue period of loans to three months from the existing six months time in line with the international standards.
"The existing amount of total capital for commercial banks will be doubled under the amendment aiming to increase the capital-base of the banks," he said, adding the central bank recommended doubling of the amount in line with the BASEL-II.
The amendment proposes a rise in the total capital of commercial banks to Tk 2.0 billion from the existing Tk 1.0 billion
Bangladesh is planning to implement the Basel-II framework for bank companies from early 2009 in line with the global standard.
The new Basel accord has been prepared on the basis of three pillars: minimum capital requirement, supervisory review process and market discipline.
According to the amendments, the board of directors of a commercial bank will consist of no more than 13 directors and their tenures will be restricted to two consecutive terms (three-year term each).
A family having above 5.0 per cent shares in a banking company would be entitled to have not more than two directors on its board, and a family having less than 5.0 per cent shares would be able to hold one post of director.
Parents, husband and wife, children, brothers and sisters and their dependants would be considered members of a family.
"It is under process of implementation. The new rules will be good for banking system in Bangladesh," Managing Director and Chief Executive Officer of the Agrani Bank Syed Abu Naser Bukhtear Ahmed told the FE Tuesday night.
The amendments will help the authorities operate the banks more professionally, a senior banker observed.
The council meeting also approved an amended proposal on policy guideline of the government for purchase of electricity from Captive Power Plants (CPP) of private owners.
Under the policy guidelines the government can purchase per-unit electricity at a maximum rate of Tk 2.23 from the CPPs. It also extends the period of agreement with a CPP to three years from six months.
The meeting also reviewed the post-flood rehabilitation programmes in the flood-affected districts.