The Ministry of Finance (MoF) has agreed to a proposal of the International Monetary Fund (IMF) to give the Bangladesh Bank (BB) the authority to fire managing directors (MDs) of the state-owned banks (SoBs) -- both commercial and specialised ones -- found guilty of any wrongdoing.

But, the ministry still remains rigid on the issue of authorising the central bank to dismiss directors, chairmen or abolish the boards of the banks concerned, highly placed sources in the MoF and BB said.

The enhanced power would be delegated to the BB by amending the existing Bank Company Act (BCA), 2003. The final draft of a bill seeking to amend the said Act is almost ready for submission to the Cabinet Division for approval.

The partial acceptance of IMF suggestion has already been conveyed to the local office of the Fund, sources said.

Finance Minister AMA Muhith had at least two meetings with Eteri Kvintradze, IMF Resident Representative in Dhaka, in the current month to sort out differences over amendments to the BCA, 2003, particularly on BB and SoBs, it is learnt.

A finance ministry official said the IMF local office has accepted the latest stance of the government on empowering the BB in line with its suggestion, though partially.

He said the BB is yet to be competent enough to exercise absolute power to regulate state-owned banks as suggested by the IMF.

"We have retreated from our earlier position, at least. Any abrupt power transfer from finance ministry to BB for regulating the government-owned banks could prove to be too much because of the poor monitoring capacity of central bankers," a senior finance ministry official told the FE.

However, top BB officials said much would depend on the position of IMF's upcoming mission. The Extended Credit Facility (ECF) mission of the IMF is scheduled to arrive in Dhaka on November 27 next to review the development of reform measures in financial sector including the revenue issues.

Under the ECF programme, the multilateral lending agency asked the government to empower the BB to dismiss bank directors, managing directors and abolish boards of directors of all SoBs, if needed.

News: The Daily Financial Express/Bangladesh/20-Nov-12