FE Report (September 30, 2010)
The government plans to amend the Bank Company Act, 1991, Bangladesh Bank (BB) Order, 1972 and the Bankers' Book Evidence Act, 1891 to remove the discrepancies in the laws concerned and strictly enforce those, a senior official of the Bangladesh Bank (BB) said.
The Ministry of Finance (MoF) has recently asked BB to explain its position soon relating to amending the relevant laws. Updating the existing banking acts in line with the global standard and accommodating the suggestions of donor groups is one of the major priorities of the government in this regard, sources in the MoF said.
The letter of the MoF, sent to the BB Governor, also asked the central bank to formulate a draft guideline for a taskforce to be commissioned soon to expedite the process of modernizing the acts and laws of banking sector.
"Major acts and laws of the banking sector, particularly Bank Company Act, 1991, BB Order, 1972 and the Bankers' Book Evidence Act, 1891 will be amended soon," a high official in the MoF said.
"The BB has been asked to carry out the task by itself and prepare a guideline for a high-powered taskforce to be commissioned soon for specific recommendations for the purpose," he added.
Experts from both BB and research organisations and economists will be included in the proposed taskforce, it is learnt.
Furthermore, the MoF in its letter also asked the BB to furnish relevant information on current overall banking position in the country and identifying weakness and loopholes, if any, in the entire banking industry, a source in the BB said.
A top banker in the BB said there are a number of discrepancies in the Bankers'
Book Evidence Act, for example, in areas of searching and freezing bank accounts of depositors and their subsequent punishments. Such flaws need to be corrected, he added.
Moreover, he said the authority of central bank, particularly in the areas of fiscal and exchange rate policies, provided by the BB Order 1972 is not fully functional and practised for long in the country due to a number of reasons, particularly for over influence from the finance ministry.
The clause 7A (a) of the Bangladesh bank Order, 1972 clearly says that one of the major functions of the central bank is formulation and implementation of monetary policy from time to time.
In addition, under the clause 7A (c) of the same order, the BB is empowered to give "advice to the government on the interaction of monetary policy with fiscal and exchange rate policy, on the impact of various policy measures on the economy and to propose legislative measures it considers necessary or appropriate to attain its objectives and perform its functions".
The BB officials said they are very much in favour of amending the Bank Company Act, 1991 to limit the number of bank directors and increasing the fines for banking frauds.
"We will surely propose to the government to limit the number of bank directors to 13 to establish more discipline in the banking sector," an Executive Director of BB told the FE.
The BB initiated the move about one year back in line with an ordinance promulgated by the immediate past caretaker government (CG), which could not be implemented due to unwillingness of the influential quarter of the government and parliamentary standing committee on MoF, sources alleged.
The ordinance promulgated by the caretaker government limited the number of directors on a bank board to a maximum of 13. But the Bank Company Act, 1991 (amended) has not limited the number of bank directors. The commercial banks appoint directors as per their respective Articles of Association, banking sources said.
The ordinance further said that a maximum of two members of a single family could be appointed as directors of a banking company if the family concerned owned more than five per cent share of that bank.
Furthermore, the ordinance provided for a maximum of one director from a single family to be appointed as director of a banking company if the family concerned owns up to five per cent share of that bank.
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