JS body opposes plan to amend BCA, FIA

The Parliamentary (JS) Standing Committee on Finance Ministry has refused to back a cabinet meeting decision on restricting an individual to become the director of a bank, financial institution or an insurance company at a time, official sources have said. It has also decided to propose to the Ministry of Finance (MoF) to bring amendment to the Insurance Act, 2010, that barred the directors of insurance companies from becoming directors of banks and financial institutions, to enable the directors of insurers to become directors of banks and financial institutions simultaneously. The standing committee meeting was held on Sunday last with its chairman AHM Mostafa Kamal in the chair. "The standing committee meeting has not agreed to the decision amend the Bank Company Act, 1991 and the Financial Institution Act, 1993, meant to restrict the simultaneous directorship of a bank, financial institution or an insurance company at a time," a source, who attended the meeting, said. "We are unhappy with the decision," he added. According to the Bank Companies Act, 1991 (BCA, 1991), an individual is not allowed to become a director of more than one banking company or more than one financial institution or more than one insurance company at a time. The similar provision is also there in the Financial Institution Act, 1993 (FIA, 1993) as well. The incumbent government, particularly the Ministry of Finance, stood against the existing provision in the current Bank Companies Act, 1991 for establishing transparency in the financial sector and addressing the conflict of interests, sources said. A cabinet meeting in June, 2010 approved the amendment to the respective clauses of the Bank Companies Act, 1991 and Financial Institutions Act, 1993 to make an individual ineligible for more than one directorship. Besides, the government enacted the Insurance Act, 2010 (IA, 2010) disqualifying an individual director of an insurance company from becoming director of a banking company or financial institution at a time. "The Insurance Act, 2010 is a unique example that put restriction on a director of an insurance company from becoming the director of a bank or financial institution at a time," a top official in the Ministry of Finance (MoF) said. "We are supportive of making the Banking Company Act, 1991 and Financial Institution Act, 1993 similar to the Insurance Act, 2010 as far as criteria of directorship is concerned," he added. The approval was accordingly sent to the parliamentary standing committee on MoF in the last quarter of 2010 before tabling it in Parliament for final approval. The Chairman of Parliamentary Standing Committee on MoF, AHM Mostafa Kamal said they were not convinced by the move to restrict directorship by amending the particular provision lying in the Bank Company Act, 1991. "We have asked MoF to review the proposal since we are not convinced of the change," Mr Kamal told the FE on Thursday. "The reason behind the MoF move to restrict the directorship is not clear to the members of the Parliamentary Standing Committee on Finance Ministry," he added. Rather, Mustafa Kamal said they had asked the ministry to undertake move in amending the Insurance Act, 2010, which restricted the director of an insurance company from becoming director of a bank and financial institution at a time. He said no bad implication on the economy has so far been noticed due to the existing provisions that allow the directorship of the same individual both in a bank and a financial institution. A top banker in Bangladesh Bank (BB) said with the refusal of the parliamentary standing committee, the fate of amendments to the two acts has become bleak. He said conflict of interests is now evident in the financial sector due to directorship of an individual in a bank, insurance company and a financial institution.