BB moves to shore up NBFIs’ corporate governance

Bangladesh Bank yesterday issued a set of rules for the appointment of directors at non-banking financial institutions (NBFIs) in order to strengthen corporate governance.

From now on, the boards of the NBFIs will have to take prior approval from Bangladesh Bank to appoint their new directors, according to a central bank notice.

The NBFIs will not be permitted to remove their directors from their respective boards without consent from the BB.

A BB official said there was no strict rule and regulation on the appointment and removal of directors from the NBFI board, which was why the central bank issued the notice.

The new measures will help strengthen corporate governance in the NBFIs, which is considered a fragile sector after facing a wide range of loan scandals, he said.

Prospective directors must have at least 10 years' experiences in either doing business or being involved in management.

They must hold the minimum number of shares with the respective NBFI as per rules set by the Bangladesh Securities and Exchange Commission.

Prospective directors or related parties can not be defaulter.

Those sentenced by either civil or criminal courts will not be able to hold directorship at NBFIs.

They will even not be allowed to hold such posts if courts have negative comments on their activities.

If the BB or other government agencies find any forgery, financial crime and other illegal activities perpetrated by the aspirants, they will not be considered to hold the directorship at any NBFI.

The persons will not be allowed to be a member of the boards of the NBFIs if they have been penalised by any regulator of the financial sector.

Individuals who worked at the NBFIs in different capacities, such as external auditor, advisor or expert and are employed either in exchange of salary or without any wage, will not be allowed to hold directorship in the NBFIs.

The tenure of directors at an NBFI is a maximum of three years and one can hold the post for three terms in a row. They, however, can join the board again after an interval of three years.

The BB official said a good number of the NBFIs were unable to repay depositors as they were now facing a fund shortage.

Some directors were involved in siphoning off money from the NBFIs, creating a crisis of confidence among general people on the non-banks.

Amidst such a situation, the High Court recently appointed new directors at the NBFIs in order to fortify corporate governance.

Prashanta Kumar Halder alias PK Halder and his associates from four non-banking financial institutions (NBFIs) embezzled more than Tk 4,000 crore.

The four NBFIs are International Leasing and Financial Services, FAS Finance, Peoples' Leasing and Reliance Finance.

Halder, who has recently been arrested in India, swindled the money with the help of some directors of the NBFIs.