New law may make banking sector vulnerable | 2018-01-18 |

New law may make banking sector vulnerable

Warn economists

Jannatul Islam     18th January, 2018 02:27:28 printer

New law may make banking sector vulnerable

The amendment to the Bank Company Act, allowing maximum four members of a single family on the board of a private bank, will make the country’s banking sector vulnerable and create scope for ‘looting’ public money, economists warned.


They said the amendment reflects the lack of urge of the government to restore ‘good environment’ in banking sector and to empower the central bank.


The law passed by the parliament on Tuesday stipulates that four members of a family instead of existing two can be inducted into the board of directors of a bank at a time.


Economists and bankers have criticised the amendment arguing that the new provision will create anarchy in the banking sector, which has been passing critical times.


They said there had been incidents of mismanagement in several private banks last year due to their directors and the new law will pave the way for families to dominate the sector.


Former Bangladesh Bank governor Salehuddin Ahmed thinks the amendment will increase influence of directors on the bank boards.


“A banking company is different from other general companies as it has to deal with the interest of depositors. The authorities should preserve the interest of depositors rather than those of the directors coming from same family for keeping sustainability of economy in the country,” Prof Salehuddin Ahmed, also a faculty of Brac University, told the daily sun.


He also mentioned that the existing regulation and guidelines can keep sustainability of economy, if the central bank keeps firm stance on supervision.


BB former executive director Prof Yasin Ali termed the amendment a ‘black shade’ as well as a reflection of lack of interest from the government to bring good environment in the sector.


“It’s absolutely a wrong decision from policymaking level.


We found the authority of the central bank has been decreasing day by day as the government forcibly enacting such kind of law. The amendment will create more opportunities to loot public money as we experienced last year,” Yasin Ali, a professor at Bangladesh Institute of Bank Management, told the daily sun.


Prof Ali mentioned that the policy will create familism in the financial sector as we found the banking sector has been dominated by several business groups.


“As we know, a business group owns six commercial banks. When they will start the practice of the law in their institutions, the total economy will shake,” Ali expressed his concerned.


The existing law allows commercial bank directors to hold the office for six years - two consecutive three-year terms.


The same individual becomes eligible to hold the post for another three-year term with a three-year break.