Economic Reporter //

Bangladesh Bank has further tightened the regulations regarding the appointment of representative directors from other companies to bank boards. Henceforth, for a company to appoint a representative director to a bank’s board after purchasing shares, the designated individual must hold the position of Managing Director (MD) or Director within that company.

Additionally, if the shareholder entity is a public limited company, it must ensure unencumbered ownership of at least 2 percent of its own paid-up capital; for other types of companies, this requirement is set at a minimum of 20 percent. Previously, there were no such specific provisions.

The central bank issued a circular regarding this matter yesterday, Thursday (September 17), and sent it to the chairmen and managing directors of the banks’ boards of directors. The circular states that these directives are to come into effect immediately.

Banks have been instructed to present these directives at their upcoming board meetings and to inform all other officials and shareholders accordingly.

The circular notes that these measures have been taken to ensure transparency and stability in the banks’ ownership structures, reduce investments that are disproportionate to the shareholder company’s financial capacity, and enhance the role, transparency, and accountability of representative directors nominated by shareholder companies. These directives will also serve to protect the interests of depositors.

According to the directives, a company may no longer purchase bank shares exceeding the value of its own net assets. If a company has already purchased shares beyond this limit, it must reduce its holdings to within the prescribed limit over the next six months. Under these rules, central bank approval is required for the reappointment or replacement of a company’s nominated representative director. Documentary evidence of shareholding must also be submitted to the central bank. The director must maintain the required level of unencumbered shareholding throughout their tenure; failure to do so—resulting in holdings falling below the stipulated threshold—will lead to the cancellation of their directorship. Individuals holding positions other than MD or Director within the concerned company cannot be appointed as representative directors on the bank’s board.

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