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The provision concerning the validity period of an order dissolving a bank’s board of directors will not generally apply to all banks in Bangladesh, the central bank has clarified.
The Banking Regulation and Policy Department of Bangladesh Bank issued a circular on Monday, August 10, on the matter. The same day, letters were sent to the managing directors and chief executive officers of all scheduled banks informing them of the decision.
According to the circular, the provision on the validity period of an order cancelling a bank’s board of directors, as referred to in Section 47(2) of the Bank-Company Act, 1991, as amended up to 2023, cannot be considered generally applicable to all banking companies.
The clarification comes at a time when the dissolution of boards, appointment of administrators and restructuring of several banks are being discussed. The move is therefore expected to clarify questions among banks about how long an order dissolving a board may remain in effect.
In its letter, Bangladesh Bank said the provision on the validity period of an order dissolving a board under Section 47(2) of the Bank-Company Act, 1991, should not be treated as a general rule applicable to all banks.
This means the duration of an order dissolving a particular bank’s board does not necessarily have to be determined according to the same rule for every bank.
However, the latest circular does not specify how long such an order will remain effective under particular circumstances or what duration will apply to individual banks.
The clarification is likely to have implications for ongoing measures involving bank governance and restructuring as the central bank continues to take steps concerning the management and boards of troubled financial institutions.