Editorial
More banks in the pipeline
Bank Company Act being flouted
The nine new banks recently approved are being given facilities that fall outside of the existing Bank Company Act; which states that no bank can appoint more than 15 directors. Hence the question must be asked what is so uniquely special about the new banks that allow them to appoint up to 20 directors. From what has been published in the media, the move apparently has something to do with allowing sponsor directors to sell these 'extra' positions at exorbitant prices. If that is indeed the case, precisely what role is Bangladesh Bank (BB), as the regulator, doing about it?
It is no secret that BB opposed the issuance of licenses of new banks when the proposal came up originally. The rationale for such opposition came from the fact that the sector is already saturated with some 47 banks in the market. There have also been allegations that proper procedures were not adhered to in case of issuing license to the new banks. According to banking experts, BB appoints at least three committees to scrutinise the applications before giving approval and the process takes anywhere up to six months. Yet, approval was given in the short span of three months, which begs the question why the process was sped up and for whose benefit.
Should the new banks be allowed to appoint more directors than the mandatory maximum of 15 directors rule other commercial banks abide by, it would create additional anarchy in the financial sector. The common perception in the banking sector and policy analysts is that BB should enforce stricter licensing criteria in considering any application for a new bank. Such cautionary advice is not without merit. Until and unless BB develops resources to properly supervise and regulate all banks in the country, it ought to have thought twice about allowing new banks to join the fray. The collective advice of bankers and experts has apparently fallen on deaf ears and political considerations have taken precedence over sound financial practices. Allowing special privileges to favoured banks is not going to be conducive in promoting a healthy banking sector.
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