The central bank has taken a move to ensure good governance in the country's banking sector through updating responsibilities and formation of banks' boards of directors, officials said.

The Bangladesh Bank (BB) issued three circulars in this connection Sunday and asked chairmen and chief executive officers (CEOs) of all the banks to comply with the existing rules and regulations in line with the Bank Company Act (Amended) 2013. 

Under the latest moves, the banks have been asked to form risk management committees along with the existing executive and audit ones to minimise fraud and forgeries in the banking sector.

The BB has specified the terms of reference and responsibilities of the committees to ensure accountability and transparency of the banks' management.

"We've taken the measures to protect the interest of depositors through establishing good governance in the banking sector," SK Sur Chowdhury, deputy governor of the BB, told the FE. 

He also said the central bank has issued the circulars in line with the Bank Company Act (Amended) 2013 to ensure corporate governance in the bank management. 

The central bank said prior approval will be sought from the BB for appointment of new directors of the banks excepting the specialised ones.

Currently, there are more than 600 directors in the commercial banks.

A meeting of the Board of Directors can be held once in a month, but it can be more if necessary. However, at least one board meeting has to be held in three months, according to the circulars. 

Regarding responsibilities of the chairmen of the boards of directors, the BB said the chairman of the board or chairman of any committee formed by the board or any director does not personally possess the jurisdiction to apply policymaking or executive authority. Therefore, he will not participate in or interfere into the administrative or operational and routine affairs of a bank.

The CEO will ensure compliance of the Bank Company Act, 1991 and/or other relevant laws and regulations in discharge of routine functions of the bank.

"The CEO shall report to the Bangladesh Bank of issues violative of the Bank Company Act, 1991 or of other laws/regulations and, if required, may apprise the board post facto," the BB said.

Besides, the BB issued a unified policy for the banks in appointing their advisors and consultants contractually.

Under the new rules, former director, chief executive officer or any other officer of the banks cannot be appointed as the advisor or consultant of the same banks contractually immediately after their retirement or termination.

However, they can be appointed as advisor or consultant of the same bank after passing one year from the date of their retirement or termination.