Banks and their directors are grappling to comply with two regulatory decisions.

The central bank has recently tightened loan rescheduling and provisioning rules, while the stock market regulator has won a High Court backing to force directors to hold 2 percent shares individually.

These two directives have put both the managements and boards of the banks in a difficult situation.

Against this backdrop, Association of Bankers Bangladesh (ABB) -- a platform of banks' managing directors -- and Bangladesh Association of Banks (BAB) -- a forum of directors -- at two separate meetings yesterday urged the regulators to be accommodative in implementing the new rules.

“We welcome all sorts of monitoring and discipline regarding loans, but these have to be accommodative and supportive to all stakeholders,” Helal Ahmed Chowdhury, managing director of Pubali Bank and vice chairman of ABB, told The Daily Star after the meeting.

The Bangladesh Bank (BB) issued a circular to the banks on June 14, asking them to make a continuous loan classification for non-repayment within three months instead of six months and limit rescheduling scopes within three times.

Chowdhury feared quick implementation of the loan rescheduling rules may give a rise to non-performing loans and an additional requirement for provisioning will eat up banks' profits and as a consequence the government will lose taxes.

The chief executives of banks sought the time till January 2014 to implement these new decisions on loan rescheduling instead of September this year.

They also asked the BB to relax rules for them in maintaining the base for provisioning at minimum 20 percent for collaterally-secured loans.

Bankers said many borrowers might become defaulters unintentionally because of the new decision.

They also said the present liquidity position amid external and internal economic slowdown is not appropriate to tighten the terms and conditions of commercial banks' loan agreements.

On the other hand, with the High Court's judgement on upholding the Securities and Exchange Commission's (SEC) power to impose the section 2CC of SEC ordinance, it has been made mandatory for directors of listed companies to hold 2 percent shares individually.

Directors had filed writ petitions with the High Court challenging the section 2CC of the SEC ordinance, but these were rejected last week.

The BAB's problem seems to be more critical as many directors will lose their directorship for not being able to hold 2 percent shares in line with the SEC decision. The BAB has decided to request the stock to give them a waiver in holding shares as banks' capital base is much higher than others.

“We want a waiver from the SEC in the issue of holding 2 percent shares by each director,” said Nazrul Islam Majumder, chairman of the BAB.

“Banks are very big companies and their paid-up capital is also very high compared to other listed companies,” he said, adding that 2 percent shares of banks would cost at least Tk 30 crore.

The Daily Star/Bangladesh/ 25th June 2012