Bangladesh Bank on Sunday restructured the boards of directors of the scheduled banks and their responsibilities in accordance with the Bank Companies (Amendment) Act 2013.
To this end, the BB issued a circular to chairmen and managing directors of all scheduled banks asking them to create three separate committees of the board of directors in a bid to ensure the good governance in the banking sector.
The BB circular said every scheduled bank would have to create three separate committees — audit committee, executive committee and risk management committee — comprising the board members.
Before amending the Bank Companies Act 1991 in July last, the central bank set guidelines for only audit committee, but the new circular asked the banks to make the risk management committee and it also set a fresh guideline for the executive committee, a BB official told New Age on Sunday.
The BB also revised the guidelines for the audit committee in accordance with the Bank Companies (Amendment) Act 2013.
The members of the risk management committee will be selected from the board of directors of the respective banks. The board will select five members for the risk management committee for three years.
The risk management committee will detect the credit risk, foreign exchange transaction-related risk, internal control and compliance-related risk.
The committee will also detect the risks of money laundering, operating, information and communication technology, interest and liquidity.
The risk management committees will take the required measures to mitigate the risks of their respective banks and they will have to review the risk management policies and guidelines of the banks for at least once in a year.
The risk management committees will have to place their recommendations to the respective boards on quarterly basis in a bid to mitigate the risks.
The risk management committees will have to organise its meeting at least four times in a year.
The BB circular set fresh terms of references for the executive committee of the scheduled banks. Before amending the bank companies act in July, there were no terms of references for the committee.
The BB circular said the members of the executive committee would be selected from the boards of the respective banks. The tenure of the committee members will be seven years and the chairman of the board will play as chairman of the committee.
The executive committee will be able to make decision and to carry out all duties of a scheduled bank except the board of directors’ activities provided by the bank companies’ act.
The BB circular said that five members of a scheduled bank’s board would be selected to comprise the audit committee. Of the five members, two independent members of the board would have to be selected for the audit committee. The members of the committee will be selected for three years.
As per Bank Companies (Amendment) Act 2013, a scheduled bank will have to appoint three independent directors if it has a board comprising 20 members. A scheduled bank, however, will be able to appoint two independent directors if its number of board members is below 20.
The audit committee will evaluate the internal control system on a regular basis and it will verify whether an internal compliance culture will be created in a bank.
The audit committee will also scrutinise whether the staff of its bank will be directed appropriately about their responsibilities.
The BB circular said the board of directors of the scheduled banks would have to organise at least one meeting in every three months. The board should organise one meeting in every month and excessive board meeting should be avoided.
A chairman or a member of a board will not be able to intervene the administrative- and operating-related daily activities of a bank, the BB circular said.
The banks will be able to avoid the appointment of a director from the depositors with the amendment to the bank companies’ act.
The BB issued two more circulars to scheduled banks on the day about their appointment procedures of managing directors and chief executive officers, and consultants.
The BB in a circular said at least 15-year job experience in the baking professions would be required for the appointment of a managing director in a scheduled bank. Besides, the official has to gather experiences for at least two years at the immediate-low ranked post of the MD and CEO of a scheduled bank.
The central bank said that the scheduled banks would appoint a consultant with at least 15-year experiences in the banking or administrative field.
A director or an officer of a bank will not be able to be appointed as a consultant for the same bank immediately after completion of his or her job tenure.
The respective bank will be able to appoint the person as a consultant after at least one year from his leaving the job, the BB said.
-With New Age input
