Directors’ interference in management to hurt banks, governor warns 

Bangladesh Bank Governor Abdur Rouf Talukder has asked directors not to interfere in the management work to ensure good governance in banks and warned that if directors intervened beyond their specific responsibilities, it would harm the financial institutions.

"The responsibilities and duties of directors and management officials at banks have been specified. They will act accordingly," he said at the opening ceremony of the "Ninth Annual Banking Conference" organised by the Bangladesh Institute of Bank Management (BIBM) at Mirpur in Dhaka on Saturday. 

"Directors will not get engaged in management work. According to the central bank policy, the officers in charge of the management of a bank will carry out the management duties," he said in his written speech.

The governor said, after taking charge, he told this to the associations of bank owners and bank executives in separate meetings.

He said that Russia's invasion of Ukraine has had a negative impact on the global supply chains. Due to this, the foreign exchange market is under a lot of pressure along with inflation in the country.

Asked whether the Bangladesh Bank will take any new initiative to control inflation, Abdur Rouf Talukder told journalists that he is hopeful that inflation will come under control within the next two to three months.

Claiming that there is no major concern in the current situation, he said, "The current inflation is due to imports... oil and fertilisers have to be brought in. Oil prices have increased. Attempts are being made to purchase fertilisers at lower rates through alternative means. The way the government and the Bangladesh Bank are proceeding to improve the situation, Bangladesh is on the good side."

The foreign exchange market has been going through volatility in recent times. The dollar rose to Tk110 in the bank and Tk120 in the open market.

Recently, the Bangladesh Bank removed the treasury heads of six domestic and foreign banks for making an excessive profit in dollar transactions and asked the managing directors to explain the reasons behind it.

Asked about further steps in this regard, the governor said, "The matter is under investigation. I will speak when the investigation is over."

The fact that the foreign exchange market is under a lot of pressure has been featured in the keynote paper of BIBM Professor Shah Md Ahsan Habib presented at the opening ceremony.

"If the government and the Bangladesh Bank do not take sufficient initiatives over inflation, it will be difficult to achieve various targets taken in the budget," he added.

In this regard, the governor said, "Because of the initiatives taken by the government and the Bangladesh Bank to control inflation by increasing the domestic supply, it will come down to a tolerable level in the next two to three months."

In the keynote paper, it was mentioned that monetary policy has plans to increase the money supply in the money market. But due to the inflationary pressure, the loan flow will decrease, which means the payment will decrease in banks. The amount of defaulted loans may increase as a result.

When many economists suggested lifting interest rate caps on loans amid the inflationary pressure, the governor said, "If the interest rate limit is lifted, the cost of money will increase for entrepreneurs."

"Besides, the fund management cost of banks will also increase. We want to provide low-cost loans to entrepreneurs. So that the cost of production comes down," he added.

Emphasising good governance, the governor said banks will not only make a profit but also continue to practice good governance, otherwise, the entire sector will suffer.

In his opening speech, BIBM Director General Md Akhtaruzzaman said the annual banking conference creates an opportunity for bankers to share their work experiences and challenges with each other.

BIBM organises an annual banking conference every year. Local and foreign bankers participate in it. Several presentation papers are presented in theme-based plenary sessions on bank management.

The event could not be held in 2020 and 2021 due to the Covid-19 pandemic.

This year it is being held after a gap of two years. Bankers from India, Malaysia and Nepal are participating online in the two-day event this year.

On the opening day, four panel discussions were held on the macro-financial environment and the financial sector. Each panel discussion covered three topics.

In the first panel discussion, chaired by Mustafa K Mujeri, executive director of the Institute of Microfinance, Syed Mahbubur Rahman, managing director of Mutual Trust Bank, Sarwar Uddin Ahmed, Md Nehal Ahmed and Mosharref Hossain.

The discussions were held on "Bangladesh at 50: Does bank financing propel economic growth in Bangladesh? Analysis of external debt sustainability of Bangladesh against stressed macroeconomic scenarios, and countercyclical capital buffer: Do the banks in Bangladesh need to build it to address procyclicality?