DEPARTMENT of MANAGEMENT STUDIES

FACULTY of BUSINESS STUDIES

JAHANGIRNAGAR UNIVERSITY

An Assignment on
Practices of Corporate Governance in
Banking Sector of Bangladesh

Course Name: Corporate Governance

Course Code: MGT- 309

Submitted on: 27 November, 2022

i
 Submitted To:
Mr. Md. Mahfuzur Rahman
Lecturer,
Department of Management Studies,
Faculty of Business Studies,
Jahangirnagar University

Submitted by:
Team- PRODIGIES
S.N. Name ID
1 Habeba Sultana Nesa 1808
2 Jannatun Nayem Jerin 1812
3 K. Nishat Tasnim Mrittika 1820
4 Md. Jamilur Rahman Raju 1823
5 Md. Wahid Abdul Hoque (L) 1828
6 Ehtesham Shahrier Sikder 2222

9th Batch
Department of Management Studies
Jahangirnagar University

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 Letter of Transmittal

27 November, 2022
To
Mr. Md. Mahfuzur Rahman
Lecturer,
Department of Management Studies,
Faculty of Business Studies,
Jahangirnagar University

Subject: Submission of assignment on “Practices of Corporate Governance in

Banking Sector of Bangladesh.”

Dear Sir,
With due respect it is stated that we are submitting our report on “Practices of Corporate
Governance in Banking Sector of Bangladesh” It was a pleasure experience on our part to go
through the process. Through the procedure of preparing the assignment, we have collected and
used necessary data from relevant sources. We hope the assignment has attained its purpose to a
considerable extent.

Please find enclosed herewith copy of report for your perusal and kind consideration. It will be
pleasure to us if you kindly accept our report.

Thanking you for your valuable advice and co-operation.

Yours sincerely,
Md. Wahid Abdul Hoque
On behalf of Team-Prodigies
Department of Management Studies
Jahangirnagar University

iii
 Acknowledgements

One of the most pleasant parts of submitting a report is the opportunity to thank those who have

contributed to it. Unfortunately, the list of expressions of thanks-no matter how extensive is

always incomplete and inadequate. These acknowledgments are no exception.

Our first acknowledgment goes to the almighty Allah for bestowing us the patience and courage

to finish this huge task within its deadline.

Then Acknowledgements must go to the team members, whose unflagging patience and

astounding capacity for creative work, and long hours made the project both possible and

successful –under the pressure of knocking deadlines.

At last, we sincerely acknowledge our debt to our honorable faculty Mr. Md. Mahfuzur Rahman,

for his valuable advice on the improvement of the project. Without his encouragement, this

would have been impossible.

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 Abstract

The extent to which the interests of the stakeholders are upheld is largely determined by

corporate governance. The term "corporate governance" is now widely used in Bangladesh's

business community. There have been various scandals in Bangladesh's banking industry in

recent years. It puts the economy in danger and discourages customers from saving money in

banks. Accountability, openness, and fairness in the corporate sector are ensured by corporate

governance. The security of the interests of the shareholders and other associated stakeholders in

the banking sector cannot exist without sound corporate governance. Bangladesh Bank is the

nation's central bank, and as such, it establishes the rules for corporate governance that must be

followed by all private and public banks. The entire economy will collapse if the banking sector

does. As banks' ability to maintain provisions against defaulted loans declined, nine banks

experienced a Tk 13,219 crore provision gap at the end of June 2022. Hallmark Group

perpetrated a scam for BDT 4,000 crore. The BDT 200 crore loan scandal involving the

Bismillah Group involves six commercial banks. The Basic Bank loan approval scandal

involving BDT 4,500 crore in improper documents and lack of inspection has brought the

problem to light once more. These sorts of dishonest behavior point to Bangladesh's weak

corporate governance as well as its general incapacity. It is wisely remarked that the entire

economy would collapse if the banking sector fell at any point. The Bangladesh Bank, the

country's central bank, is primarily responsible for creating the ideal climate for corporate

governance.

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 Table of Contents
CHAPTER 1: INTRODUCTION........................................................................................................................7
1.1. What is Corporate Governance?..........................................................................................................9
1.2. What is Good Corporate Governance?.................................................................................................9
1.3. Corporate Governance Scenario in Bangladesh..................................................................................10
1.4. Need for Corporate Governance in Bangladesh.................................................................................11
1.5. Corporate Governance in the Banking Sector of Bangladesh.............................................................12
CHAPTER 2: ANALYSIS AND FINDINGS.......................................................................................................14
2.1. Board of Directors..............................................................................................................................14
2.2. Governance of Board of Directors of Subsidiary Company.................................................................30
2.3. Managing Director (MD) or Chief Executive Officer (CEO), Chief Financial Officer (CFO), Head of
Internal Audit and Compliance (HEAC) and Company Secretary (CS)-.......................................................31
2.4. Board of Directors' Committee.-.........................................................................................................34
2. 5. Audit Committee................................................................................................................................35
2. 6. Nomination and Remuneration Committee (NRC):...........................................................................47
2. 7. External or Statutory Auditors...........................................................................................................51
2. 8. Maintaining a website by the company.............................................................................................53
2. 9. Reporting and Compliance of Corporate Governance.......................................................................54
CHAPTER 3: RECOMMENDATION..............................................................................................................55
3.1. Increasing the Board of Directors' competence.................................................................................55
3.2. Ensuring accurate and reliable financial reporting.............................................................................55
3.3. Total policy implementation...............................................................................................................56
3.4. Institutional Capacity Building............................................................................................................56
3.5. Enhancing the Penalties and Rules to Follow the Rules......................................................................57
3.6. Ensuring the strongest corporate governance practices....................................................................57
3.7. Raising the Bar for Ethics....................................................................................................................58
CHAPTER 4: CONCLUSION.........................................................................................................................59
CHAPTER 5: REFERENCE............................................................................................................................60

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CHAPTER 1: INTRODUCTION

Corporate governance refers to the set of laws, customs, and procedures that regulate and control

an organization. It addresses problems that result from the separation of ownership and control.

After the global corporate scandals involving large companies like Enron and Andersen in the

United States of America, corporate governance became very important in the last century.

Because they guarantee the monitoring and control of the effectiveness of the laws and

regulations in the business sector, these issues are becoming increasingly popular in the

corporate sector. The concepts related to practices of corporate governance in the banking sector

are discussed in this report.

By following the corporate governance guidelines in the corporate sector, corporate governance

protects the interests of the business entity's stakeholders and shareholders. Corporate

governance is crucial for both the company's directors and shareholders. For the stakeholders and

shareholders involved with commercial organizations, it is crucial. Market analysts discover that

consumers are also curious about how corporations conduct their corporate governance. The

primary goal or objective of corporate governance is to protect or make transparent the company

environment from financial system manipulation or other scandals. There are both commercial

banks and government banks in Bangladesh that serve the corporate market.

An economy like Bangladesh can benefit from improved corporate governance in the banking

industry. The banking industry plays a significant role in the growth of the national economy.

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Due to two perspectives, such as the stakeholders' goals and a lack of knowledge about them, the

requirement for corporate governance may lead to some issues and disputes amongst the

stakeholders. To ensure the proper business conditions for the banking industry in Bangladesh,

corporate governance must be practiced by every bank in our nation. For the health of the

nation's economy and business sector, Bangladesh's banking sector's corporate governance

policies are a crucial topic.

Nearly as crucial as the company's main business plan, corporate governance is of peculiar

paramount importance to the organization. It can avoid corporate scandals, fraud, and the

company's civil and criminal liabilities when carried out correctly. The goal of the corporate

governance study is to describe the corporate governance framework and policies that govern our

banking industry. Corporate governance measures are regarded as being secure in recent years in

Asia due to the Asian Economic Crisis. Corporate governance has a substantial impact on the

banking industry's ability to make better financial decisions throughout routine business

operations. Corporate governance procedures define the principles, ethics, and morals for the

company, ensuring the safety and security of the corporate sector. Therefore, this report aims to

present the current state and environment of the banking sector for commercial purposes.

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1.1. What is Corporate Governance?

Even if the topic of corporate governance is described differently by each analyst, the central

premise is nearly universally shared by all corporate sector analysts. Corporate governance is the

framework and procedures for making decisions relating to an organization. Corporate

governance considers the approaches to make the best decision while also considering the events

and making a rational decision for the business that the firm cannot be affected by. The main

goal of corporate governance in the banking industry is to hold managers and directors

accountable for carrying out their administrative and management tasks in an effective and

efficient manner. Corporate governance is defined in significant part by the governance,

institutional systems, financial situation, political structures, and general economic system.

Although the aforementioned factors contributed to the definition of CG, the corporate idea of

corporate governance is universal across all nations.

1.2. What is Good Corporate Governance?

Better business policies are made possible by good corporate governance, which is also

vital for stakeholders including employees, directors, and shareholders. The following interested

parties are safeguarded by governance. The following are examples of good corporate

governance:

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  Board members must be qualified for their positions and possess a solid understanding of

corporate governance.

 Members must constantly be prepared to handle the difficulties of carrying out and

analyzing the vision, mission, and objectives of a firm, such as the banking industry.

 Members of the board must make sure that they are fully responsible for the

organization's personnel and that they have a great deal of liability.

 Directors of the bank must be able to make decisions in all economic conditions,

including boom times and downturns, by having a clear understanding of the

organization's vision, goal, and strategy.

1.3. Corporate Governance Scenario in Bangladesh

Bangladesh's corporate governance is in very poor shape by international standards.

A portion of the huge organizations operating in our nation does not want to exercise corporate

governance despite their size. Bangladesh's corporate governance depends on the rules set by

specific organizations, such as the Bangladesh Securities and Exchange Commission and

Bangladesh Bank. The main barrier to adopting corporate governance in Bangladesh is the fact

that the majority of businesses are family-oriented, which makes the board members reluctant to

do so. The current state of corporate governance in Bangladesh makes it impossible for

shareholders and other interested parties to have enough security to act in their best interests, and

there is uncertainty regarding it. Some recent financial scandals and collapses, such as those

involving HALLMARK, BASIC BANK, FARMERS BANK, BISMILLAH GROUP, and

DESTINY GROUP, demonstrate a reluctance among people to invest.

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1.4. Need for Corporate Governance in Bangladesh

Since Bangladesh's independence, corporate governance in that country has had a very recent

history. There was just a small improvement in business governance in Bangladesh 60 years ago.

Following Bangladesh's independence, Corporate organizations like the BCIC and BSEC were

created by the government. The corporate sector began to privatize in the first half of 1980, and

the private sector began to have an impact on the economy from these points. Even though there

was no scandal prior to the 1996 stock market meltdown and no corporate governance at all.

Corporate governance has to be established in the wake of the stock market scandal. After 2000

there are several numbers of scandals in Bangladesh which indicates the necessity of corporate

governance.

These relationships and obligations are clarified in the following policy, which also seeks to

advance good corporate governance:

 Because disclosure information is a requirement for the capital market to function as

good management practice, the company is required to provide information to

shareholders.

 The regulatory body has a duty to establish a productive market for regulating company

governance.

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  The public sector banking sector, which has shown itself to be a passive observer, holds

substantial blocks of shares in Bangladeshi corporations.

According to the situation in Bangladesh described above, both poor corporate governance and a

lack of corporate governance have a negative influence on the country's businesses and the

general economy.

1.5. Corporate Governance in the Banking Sector of Bangladesh

In today's world, the banking industry plays a crucial role of fostering economic growth and has

a significant direct contribution to the Gross domestic product in emerging nations like

Bangladesh. Six nationalized commercial banks, three state-owned specialty banks, and nine

foreign banks made up Bangladesh's post-independence banking sector. With the entry of private

banks in the 1980s, the banking industry experienced substantial expansion. Now, there are

mainly two types of banks in Bangladesh:

Scheduled Banks: Institutions that continue to be included on the list of banks kept in accordance

with the Bangladesh Bank Order, 1972.

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Non-Scheduled Banks: Banks that are not Scheduled Banks but that were founded for a specific,

specific purpose and function under any laws. These banks are unable to carry out all the duties

of scheduled banks.

Bangladesh Bank, which has the authority to do so under the Bangladesh Bank Order, 1972,

fully controls and supervises all 61 scheduled banks in Bangladesh and the Bank Company Act,

1991.

There are numerous issues in Bangladesh's banking industry, including poor asset management,

liquidity issues, and managerial issues. As their loss rates rise, government banks like Sonali,

Rupali, Janata, and Agrani Bank have low rates of profit last few years. The private sector banks,

including AB Bank, City Bank, National Bank, Dutch Bangla Bank, Eastern Banking, Dhaka

Bank, Brac Bank, Standard Bank, and IFIC Bank, are well-profitable. The Farmers Bank's

financial situation is the worst of any bank in its third generation. The largest dividend policy

among the banks in our nation belongs to the Islamic bank. The Sariah bank of our country like

The Islamic bank Bangladesh limited has a good environment.

Any bank's internal control systems are essential for conducting business successfully or

efficiently in the banking industry and ensuring good governance practices. The top-ranking

banks in Bangladesh are those with strong internal controls. Corporate governance indicates that

banks in Bangladesh carry out both short-term and long-term operations in accordance with the

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rules. The Bangladeshi central bank has the power to address these concerns and take the

appropriate action to address the mismatch.

CHAPTER 2: ANALYSIS AND FINDINGS

The analysis of practices of corporate governance in the banking sector is given in nine headings

based on the Corporate Governance Code by Bangladesh Securities and Exchange Commission.

For this study, the banks which are listed on the Stock Exchange have been chosen. We have

chosen four banks: Al-Arafah Islami Bank Limited, BRAC Bank, Dutch Bangla Bank, and Prime

Bank.

2.1. Board of Directors

(1) Size of the Board of Directors

The total number of members of a company’s Board of Directors (hereinafter referred to as

“Board”) shall not be less than 5 (five) and more than 20 (twenty).

Findings: In our survey of four banks, we have found than 100 % of the banks complied with

this code.

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 CODE 1.(1) Size of the Board of Directors

Complied
Not Complied
N/A

100%

(2) Independent Directors

All companies shall have effective representation of independent directors on their Boards, so

that the Board, as a group, includes core competencies considered relevant in the context of each

company; for this purpose, the companies shall comply with the following: -

(a) At least one-fifth (1/5) of the total number of directors in the company’s Board shall be

independent directors; any fraction shall be considered to the next integer or whole number for

calculating number of independent director(s);

(b) For the purpose of this clause “independent director” means a director-

(i) who either does not hold any share in the company or holds less than one percent (1%) shares

of the total paid-up shares of the company;

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(ii) who is not a sponsor of the company or is not connected with the company’s any sponsor or

director or nominated director or shareholder of the company or any of its associates, sister

concerns, subsidiaries and parents or holding entities who holds one percent (1%) or more shares

of the total paid-up shares of the company based on family relationship and his or her family

members also shall not hold above mentioned shares in the company: Provided that spouse, son,

daughter, father, mother, brother, sister, son-in-law, and daughter-in-law shall be considered as

family members;

(iii) who has not been an executive of the company in immediately preceding 2 (two) financial

years;

(iv) who does not have any other relationship, whether pecuniary or otherwise, with the company

or its subsidiary or associated companies;

(v) who is not a member or TREC (Trading Right Entitlement Certificate) holder, director, or

officer of any stock exchange;

(vi) who is not a shareholder, director excepting independent director or officer of any member

or

TREC holder of stock exchange or an intermediary of the capital market;

(vii) who is not a partner or an executive or was not a partner or an executive during the

preceding 3 (three) years of the concerned company’s statutory audit firm or audit firm engaged

in internal audit services or audit firm conducting special audit or professional

certifying compliance of this Code;

(viii) who is not independent director in more than 5 (five) listed companies;

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(ix) who has not been convicted by a court of competent jurisdiction as a defaulter in payment of

any loan or any advance to a bank or a Non-Bank Financial

Institution (NBFI); and

(x) who has not been convicted for a criminal offence involving moral turpitude;

(c) The independent director(s) shall be appointed by the Board and approved by the

shareholders in the Annual General Meeting (AGM);

(d) The post of independent director(s) cannot remain vacant for more than 90 (ninety) days; and

(e) The tenure of office of an independent director shall be for a period of 3 (three) years, which

may be extended for 1 (one) tenure only: Provided that a former independent director may be

considered for reappointment for another tenure after a time gap of one tenure, i.e., three years

from his or her completion of consecutive two tenures [i.e., six years]: Provided further that the

independent director shall not be subject to retirement by rotation as per the company act 1994.

Explanation: For the purpose of counting tenure or term of independent director, any partial

term of tenure shall be deemed to be a full tenure.

Findings: In our survey of four banks, we have found than 100 % of the banks complied with

this code.

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CODE 1. (2) Independent Directors
 Complied
Not Complied
N/A
100%

(3) Qualification of Independent Director. -

(a) Independent director shall be a knowledgeable individual with integrity who is able to ensure

compliance with financial laws, regulatory requirements and corporate laws and can make

meaningful contribution to the business;

(b) Independent director shall have following qualifications:

(i) Business Leader who is or was a promoter or director of an unlisted company having

minimum paid-up capital of Tk. 100.00 million or any listed company or a member of any

national or international chamber of commerce or business association; or

(ii) Corporate Leader who is or was a top-level executive not lower than Chief Executive Officer

or Managing Director or Deputy Managing Director or Chief Financial Officer or Head of

Finance or Accounts or Company Secretary or Head of Internal Audit and Compliance or Head

of Legal Service or a candidate with equivalent position of an unlisted company having

minimum paid-up capital of Tk. 100.00 million or of a listed company; or

Explanation: Top level executive includes Managing Director (MD) or Chief Executive Officer

(CEO), Additional or Deputy Managing Director (AMD or DMD), Chief Operating Officer

(COO), Chief Financial Officer (CFO), Company Secretary (CS), Head of Internal Audit and

Compliance (HIAC), Head of Administration and Human Resources or equivalent positions and

same level or ranked or salaried officials of the company.

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(iii) Former official of government or statutory or autonomous or regulatory body in the position

not below 5th Grade of the national pay scale, who has at least educational background of

bachelor degree in economics or commerce or business or Law; or

(iv) University Teacher who has educational background in Economics or Commerce or

Business Studies or Law; or

(v) Professional who is or was an advocate practicing at least in the High Court Division of

Bangladesh Supreme Court or a Chartered Accountant or Cost and Management Accountant or

Chartered Financial Analyst or Chartered Certified Accountant or Certified Public Accountant or

Chartered Management Accountant or Chartered Secretary or equivalent qualification;

(c) The independent director shall have at least 10 (ten) years of experiences in any field

mentioned in clause (b);

(d) In special cases, the above qualifications or experiences may be relaxed subject to prior

approval of the Commission.

Findings: In our survey of four banks, we have found than 100% of the banks complied with this

code.

CODE 1. (3) Qualification of Independent Director-

Complied 19
Not Complied
N/A

100%
(4) Duality of the Chairperson of the Board of Directors and Managing Director or Chief

Executive Officer:

(a) The positions of the Chairperson of the Board and the Managing Director (MD) and/or Chief

Executive Officer (CEO) of the company shall be filled by different individuals;

(b) The Managing Director (MD) and/or Chief Executive Officer (CEO) of a listed company

shall not hold the same position in another listed company;

(c) The Chairperson of the Board shall be elected from among the non-executive directors of the

company;

(d) The Board shall clearly define respective roles and responsibilities of the Chairperson and the

Managing Director and/or Chief Executive Officer;

(e) In the absence of the Chairperson of the Board, the remaining members may elect one of

themselves from non-executive directors as Chairperson for that particular Board’s meeting; the

reason of absence of the regular Chairperson shall be duly recorded in the minutes.

Findings: All codes are:

Institution Complied Not complied

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 Prime Bank  -

AIBL  -

Dutch-Bangla Bank  -

BRAC Bank  -

(5) The Directors’ Report to Shareholders:

(i) An industry outlook and possible future developments in the industry;

(ii) The segment-wise or product-wise performance;

(iii) Risks and concerns including internal and external risk factors, threat to sustainability and

negative impact on environment, if any;

Findings: Above those code are

Institution Complied Not Complied

AIBL  -

BRAC Bank  -

Dutch-Bangla Bank  -

Prime Bank  -

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(iv) A discussion on Cost of Goods sold, Gross Profit Margin and Net Profit Margin, where

applicable;

(v) A discussion on continuity of any extraordinary activities and their implications (gain or

loss);

Findings: this two are:

Institution Complied Not complied

AIBL  -

BRAC Bank  -

Prime Bank  -

(vi) A detailed discussion on related party transactions along with a statement showing amount,

nature of related party, nature of transactions and basis of transactions of all related party

transactions;

Findings: it is applied in

AIBL Prime Bank BRAC Bank Dutch-Bangla Bank

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(vii) A statement of utilization of proceeds raised through public issues, rights issues and/or any

other instruments;

Findings: its applied in-

BRAC Bank Dutch-Bangla Bank

(viii) An explanation if the financial results deteriorate after the company goes for Initial Public

Offering (IPO), Repeat Public Offering (RPO), Rights Share Offer, Direct Listing, etc. An

explanation on any significant variance that occurs between Quarterly Financial performances

and Annual Financial Statements;

Findings: its only applied in Dutch-Bangla Bank.

(ix) An explanation on any significant variance that occurs between Quarterly Financial

performances and Annual Financial Statements;

Findings: its applied in

Prime Bank Dutch-Bangla Bank

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(x) A statement of remuneration paid to the directors including independent directors;

(xi) A statement that the financial statements prepared by the management of the issuer company

present fairly its state of affairs, the result of its operations, cash flows and changes in equity;

(xii) A statement that proper books of account of the issuer company have been maintained;

(xiii) A statement that appropriate accounting policies have been consistently applied in

preparation of the financial statements and that the accounting estimates are based on reasonable

and prudent judgment;

(xiv) A statement that International Accounting Standards (IAS) or International Financial

Reporting Standards (IFRS), as applicable in Bangladesh, have been followed in preparation of

the financial statements and any departure there from has been adequately disclosed;

(xv) A statement that the system of internal control is sound in design and has been effectively

implemented and monitored;

(xvi) A statement that minority shareholders have been protected from abusive actions by, or in

the interest of, controlling shareholders acting either directly or indirectly and have effective

means of redress;

(xvii) A statement that there is no significant doubt upon the issuer company’s ability to continue

as a going concern, if the issuer company is not considered to be a going concern, the fact along

with reasons there of shall be disclosed;

(xviii) An explanation that significant deviations from the last year’s operating results of the

issuer company shall be highlighted and the reasons thereof shall be explained;

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(xix) A statement where key operating and financial data of at least preceding 5 (five) years shall

be summarized;

Findings: Above those code are-

Institutions Complied Not Complied

Prime Bank  -

AIBL  -

BRAC Bank  -

Dutch-Bangla Bank  -

(xx) An explanation on the reasons if the issuer company has not declared dividend (cash or

stock) for the year;

Findings: its only applied in Prime Bank.

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(xxi) Board’s statement to the effect that no bonus share or stock dividend has been or shall be

declared as interim dividend;

(xxii) The total number of Board meetings held during the year and attendance by each director;

(xxiii) A report on the pattern of shareholding disclosing the aggregate number of shares (along

with name-wise details where stated below) held by:

(a) Parent or Subsidiary or Associated Companies and other related parties (name-wise details);

(b) Directors, Chief Executive Officer, Company Secretary, Chief Financial Officer, Head of

Internal Audit and Compliance and their spouses and minor children (name-wise details);

(c) Executives; and

(d) Shareholders holding ten percent (10%) or more voting interest in the company (name-wise

details);

Findings: the remaining codes are-

Institutions Complied Not Complied

AIBL  -

BRAC Bank  -

Prime Bank  -

Dutch-Bangla Bank  -

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(6) Meetings of the Board of Directors

The company shall conduct its Board meetings and record the minutes of the meetings as well as

keep required books and records in line with the provisions of the relevant Bangladesh

Secretarial Standards (BSS) as adopted by the Institute of Chartered Secretaries of Bangladesh

(ICSB) in so far as those standards are not inconsistent with any condition of this Bank.

Meetings of the board of Directors

27
 100% Complied
Not Complied

N/A

Findings: After survey of these 4 banks, Banking industry follow this corporate governance

code is 100% followed.

(7) Code of Conduct for the Chairperson, other Board members and Chief Executive

Officer

a) The Board shall lay down a code of conduct, based on the recommendation of the Nomination

and Remuneration Committee (NRC) at condition No. 6, for the Chairperson of the Board, other

board members and Chief Executive Officer of the company;

b) The code of conduct as determined by the NRC shall be posted on the website of the

company including, among others, prudent conduct and behavior; confidentiality; conflict of

interest; compliance with laws, rules and regulations; prohibition of insider trading; relationship

with environment, employees, customers and suppliers; and independency.

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Findings: After survey of these 4 banks, Banking industry don't follow this corporate

governance code.

2.2. Governance of Board of Directors of Subsidiary Company

(a) Provisions relating to the composition of the Board of the holding company shall be made

applicable to the composition of the Board of the subsidiary company;

b) At least 1 (one) independent director on the Board of the holding company shall be a director

on the Board of the subsidiary company;

c) The minutes of the Board meeting of the subsidiary company shall be placed for review at the

following Board meeting of the holding company;

(d) The minutes of the respective Board meeting of the holding company shall state that they

have reviewed the affairs of the subsidiary company also.

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(e) The Audit Committee of the holding company shall also review the financial statements, in

particular the investments made by the subsidiary company.

Bank Applied

AIBL Complied

BRAC Bank Complied

Prime Bank Not Complied

DBBL Not Complied

Findings: After survey of these 4 banks, 50% Banking industry follow this corporate governance

code. And 50% banking industry did not apply it.

2.3. Managing Director (MD) or Chief Executive Officer (CEO), Chief

Financial Officer (CFO), Head of Internal Audit and Compliance

(HEAC) and Company Secretary (CS)-

(1)Appointment

(a) The Board shall appoint a Managing Director (MD) or Chief Executive Officer (CEO), a

Company Secretary (CS), a Chief Financial Officer (CFO) and a Head of Internal Audit and

Compliance (HIAC);

(b) The positions of the Managing Director (MD) or Chief Executive Officer (CEO), Company

30
Secretary (CS), Chief Financial Officer (CFO) and Head of Internal Audit and Compliance

(HIAC) shall be filled by different individuals;

c) The MD or CEO, CS, CFO and HIAC of a listed company shall not hold any executive

position in any other company the same at time.

(d) The Board shall clearly define respective roles, responsibilities and duties of the CFO, the

HIAC and the CS.

e) The MD or CEO, CS, CFO and HIAC shall not be removed from their position without

approval of the Board as well as immediate dissemination to the Commission and stock

exchange(s).

Findings: After survey of these 4 banks, 75% Banking industry follow this corporate governance

code. And 25% banking industry don't follow this corporate governance code.

(2) Requirement to attend Board of Directors' Meetings

The MD or CEO, CS, CFO and HIAC of the company shall attend the meetings of the Board:

Provided that the CS, CFO and/or the HIAC shall not attend such part of a meeting of the Board

which involves consideration of an agenda item relating to their personal matters.

Bank Applied

31
 AIBL Complied

BRAC Bank Complied

Prime Bank Not Complied

DBBL Complied

Findings: After survey of these 4 banks, 75% banking Industry follow this sub code and 25% of

banking industry don't follow this corporate governance sub code.

(3) Duties of Managing Director (MD) or Chief Executive Officer (CEO) and Chief

Financial Officer (CFO)

(a) The MD or CEO and CFO shall certify to the Board that they have reviewed financial

statements for the year and that to the best of their knowledge and belief:

(i) these statements do not contain any materially untrue statement or omit any material fact or

contain statements that might be misleading; and

(ii) these statements together present a true and fair view of the company's affairs and are in

compliance with existing accounting standards and applicable laws;

(b) The MD or CEO and CFC shall also certify that there are, to the best of knowledge and

32
belief, no transactions entered into by the company during the year which are illegal or in

violation of the code of conduct for the company's Board or its members:

(c) The certification of the MD or CEO and CFO shall be disclosed in the Annual Report.

Bank Applied

AIBL Complied

BRAC Bank Complied

Prime Bank Complied

DBBL Complied

Findings: After survey, banking industry follow this code 100%.

2.4. Board of Directors' Committee.-

For ensuring good governance in the company, the Board shall have at least following sub-

committees:

(i) Audit Committee; and

Bank Applied

AIBL Complied

BRAC Bank Complied

Prime Bank Complied

33
 DBBL Complied

Findings: After survey we see that banking industry 100% follow this code.

(ii) Nomination and Remuneration Committee;

Findings:

After survey of these 4 banks, banking industry Don't follow this sub code of corporate

governance.

2. 5. Audit Committee.

(1) Responsibility to the Board of Directors.

(a) The company shall have an Audit Committee as a sub- committee of the

Board;

(b) The Audit Committee shall assist the Board in ensuring that the financial

statements reflect true and fair view of the state of affairs of the company and

in ensuring a good monitoring system within the business;

(c) The Audit Committee shall be responsible to the Board; the duties of the

Audit Committee shall be clearly set forth in writing.

34
Findings:

Followed Partially Followed

Prime Bank

Dutch Bangla Bank

Limited

Brac Bank

Al-arafah Bank

Limited

(2) Constitution of the Audit Committee

(a) The Audit Committee shall be composed of at least 3 (three) members;

(b) The Board shall appoint members of the Audit Committee who shall be non-

executive directors of the company excepting Chairperson of the Board and

shall include at least 1 (one) independent director;

(c) All members of the audit committee should be “financially literate” and at

least 1 (one) member shall have accounting or related financial management

background and 10 (ten) years of such experience;

Explanation: The term “financially literate” means the ability to read and understand the

financial statements like statement of financial position, statement of comprehensive income,

statement of changes in equity and cash flows statement and a person will be considered to have

35
accounting or related financial management expertise if he or she possesses professional

qualification or Accounting or Finance graduate with at least 10 (ten) years of corporate

management or professional experiences.

(d) When the term of service of any Committee member expires or there is any

circumstance causing any Committee member to be unable to hold office

before expiration of the term of service, thus making the number of the

Committee members to be lower than the prescribed number of 3 (three)

persons, the Board shall appoint the new Committee member to fill up the

vacancy immediately or not later than 1 (one) month from the date of

vacancy in the Committee to ensure continuity of the performance of work of

the Audit Committee;

(e) The company secretary shall act as the secretary of the Committee;

(f) The quorum of the Audit Committee meeting shall not constitute without at

least 1 (one) independent director.

Followed Partially Followed

Prime Bank

Dutch Bangla Bank

36
 Limited

Brac Bank

Al-arafah Bank

Limited

(3) Chairperson of the Audit Committee

(a) The Board shall select 1 (one) member of the Audit Committee to be

Chairperson of the Audit Committee, who shall be an independent director;

(b) In the absence of the Chairperson of the Audit Committee, the remaining

members may elect one of themselves as Chairperson for that particular

meeting, in that case there shall be no problem of constituting a quorum as

required under condition No. 5(4)(b) and the reason of absence of the regular

Chairperson shall be duly recorded in the minutes.

37
 (c) Chairperson of the Audit Committee shall remain present in the Annual

General Meeting (AGM):

Provided that in absence of Chairperson of the Audit Committee, any other member from the

Audit Committee shall be selected to be present in the annual general meeting (AGM) and

reason for absence of the Chairperson of the Audit Committee shall be recorded in the minutes of

the AGM.

Followed Partially Followed

Prime Bank

Dutch Bangla Bank

Limited

Brac Bank

Al-arafah Bank

Limited

38
(4) Meeting of the Audit Committee

(a) The Audit Committee shall conduct at least its four meetings in a financial

year: Provided that any emergency meeting in addition to regular meeting

may be convened at the request of any one of the members of the Committee;

(b) The quorum of the meeting of the Audit Committee shall be constituted in

presence of either two members or two-third of the members of the Audit

Committee, whichever is higher, where presence of an independent director

is a must.

Yes Partially Followed

Prime Bank

Dutch Bangla Bank

Limited

Brac Bank

Al-arafah Bank

Limited

39
(5) Role of Audit Committee

The Audit Committee shall:

• Oversee the financial reporting process;

• monitor choice of accounting policies and principles;

• monitor Internal Audit and Compliance process to ensure that it is

adequately resourced, including approval of the Internal Audit and

Compliance Plan and review of the Internal Audit and Compliance

Report;

• oversee hiring and performance of external auditors;

• hold meeting with the external or statutory auditors for review of the

annual financial statements before submission to the Board for

approval or adoption;

• review along with the management, the annual financial statements

before submission to the Board for approval;

• review along with the management, the quarterly and half yearly

financial statements before submission to the Board for approval;

• review the adequacy of internal audit function;

• review the Management’s Discussion and Analysis before disclosing

in the Annual Report;

40
• review statement of all related party transactions submitted by the

management;

• review Management Letters or Letter of Internal Control weakness

issued by statutory auditors;

• oversee the determination of audit fees based on scope and magnitude,

level of expertise deployed and time required for effective audit and

evaluate the performance of external auditors; and (m) oversee

whether the proceeds raised through Initial Public Offering (IPO) or

Repeat Public Offering (RPO) or Rights Share Offer have been

utilized as per the purposes stated in relevant offer document or

prospectus approved by the Commission:

• Provided that the management shall disclose to the Audit Committee

about the uses or applications of the proceeds by major category

(capital expenditure, sales and marketing expenses, working capital,

etc.), on a quarterly basis, as a part of their quarterly declaration of

financial results:

• Provided further that on an annual basis, the company shall prepare a

statement of the proceeds utilized for the purposes other than those

stated in the offer document or prospectus for publication in the

Annual Report along with

• the comments of the Audit Committee.

41
 Yes Partially Followed

Prime Bank

Dutch Bangla Bank

Limited

Brac Bank

Al-arafah Bank

Limited

(6) Reporting of the Audit Committee

(a) Reporting to the Board of Directors

(i) The Audit Committee shall report on its activities to the Board.

(ii) The Audit Committee shall immediately report to the Board on the

following findings, if any:

(a) report on conflicts of interests;

42
 (b) suspected or presumed fraud or irregularity or material defect

identified in the internal audit and compliance process or in the

financial statements;

(c) suspected infringement of laws, regulatory compliances

including securities related laws, rules and regulations; and

(d) any other matter which the Audit Committee deems necessary

shall be disclosed to the Board immediately;

(b) Reporting to the Authorities

If the Audit Committee has reported to the Board about anything which has material impact on

the financial condition and results of operation and has discussed with the Board and the

management that any rectification is necessary and if the Audit Committee finds that such

rectification has been unreasonably ignored, the Audit Committee shall report such finding to the

Commission, upon reporting of such matters to the Board for three times or completion of a

period of 6 (six) months from the date of first reporting to the Board, whichever is earlier.

43
 Yes Partially Followed

Prime Bank

Dutch Bangla Bank

Limited

Brac Bank

Al-arafah Bank

Limited

44
(7) Reporting to the Shareholders and General Investors

Report on activities carried out by the Audit Committee, including any report made to the Board

under condition No. 5(6)(a)(ii) above during the year, shall be signed by the Chairperson of the

Audit Committee and disclosed in the annual report of the issuer company.

Yes Partially Followed

Prime Bank

Dutch Bangla Bank

Limited

Brac Bank

Al-arafah Bank

Limited

45
2. 6. Nomination and Remuneration Committee (NRC):

6.1 Responsibility to the Board of Directors

6(1)(a) The company shall have a NRC as a sub-committee of the Board.

6(1)(b) The NRC shall assist the Board in the formulation of the nomination criteria or policy for

determining qualifications, positive attributes experiences and independence of directors and top

level executive as well as a policy for formal process of considering remuneration of directors,

top level executive;

6(1)(c) The Terms of Reference (TOR) of the NRC shall be clearly set forth in writing covering

the areas stated at the condition No. 6(5)(b);

6.2 Constitution of the NRC

6(2)(a) The Committee shall comprise of at least three members including an independent

director (ID);

6(2)(b) All members of the Committee shall be non-executive directors;

6(2)(c) Members of the Committee shall be nominated and appointed by the Board;

6(2)(d) Board shall have authority to remove and appoint any member of the committee;

6(2)(e) In case of death, resignation, disqualification, or removal of any member of the

Committee or in any other cases of vacancies, the board shall fill the vacancy within 180 (one

hundred eighty) days of occurring such vacancy in the Committee;

46
6(2)(f) The Chairperson of the Committee may appoint or co-opt any external expert and/or

member(s) of staff to the Committee as an advisor who shall be a non-voting member if the

Chairperson feels that advice or suggestion from such external expert and or member(s) of staff

shall be required or valuable for the Committee;

6(2)(g) The company secretary shall act as the secretary of the committee;

6(2)(h) The quorum of the NRC meeting shall not constitute without the attendance of at least an

independent director;

6(2)(i) No member of the NRC shall receive, either directly or indirectly, any remuneration for

any advisory or consultancy role or otherwise, other than Director’s fees or honorarium from the

company;

6.3 Chairperson of the NRC

6(3)(a) The Board shall select 1 (one) member of the NRC to be Chairperson of the Committee,

who shall be an independent director;

6(3)(b) In the absence of the Chairperson of the NRC, the remaining members may elect one of

themselves as Chairperson for that particular meeting, the reason of absence of the regular

Chairperson shall be duly recorded in the minutes;

6(3)(c) The Chairperson of the NRC shall attend the annual general meeting (AGM) to answer

the queries of the shareholders.

47
6.4 Meeting of the NRC

6(4)(a) The NRC shall conduct at least one meeting in a financial year.

6(4)(b) The Chairperson of the NRC may convene any emergency meeting upon request by any

member of the NRC.

6(4)(c) The quorum of the meeting of the NRC shall be constituted in presence of either two

members or two-third of the members of the Committee, whichever is higher, where the presence

of an independent director is must as required under condition No. 6(2)(h).

6(4)(d) The proceedings of each meeting of the NRC shall duly be recorded in the minutes and

such minutes shall be confirmed in the next meeting of the NRC.

6.5 Role of NRC

6(5)(a) NRC shall be independent and responsible/accountable to the Board and to the

shareholders;

6(5)(b)(i)(a) NRC shall oversee, formulate & recommend to the Board regarding the level and

composition of remuneration is reasonable and sufficient to attract, retain and motivate suitable

directors to run the company successfully;

6(5)(b)(i)(b) Relationship of remuneration to performance is clear and meets appropriate

performance benchmarks;

6(5)(b)(i)(c) Remuneration to directors, top level executive involves a balance between fixed and

incentive pay reflecting short and long term performance objectives appropriate to the working

of the company and its goals;

48
6(5)(b)(ii) Devising a policy on Board’s diversity taking into consideration age, gender,

experience, ethnicity, educational background and nationality;

6(5)(b)(iii) Identifying persons who are qualified to become directors and who may be appointed

in top-level executive position in accordance with the criteria laid down, and recommend their

appointment and removal to the Board;

6(5)(b)(iv) Formulating criteria for evaluation of performance of independent directors and the

Board;

6(5)(b)(v) Identifying the company’s needs for employees at different levels and determine their

selection, transfer or replacement and promotion criteria;

6(5)(b)(vi) Developing recommending and reviewing annually the company’s human resources

and training policies.

6(5)(c ) The company shall disclose the nomination and remuneration policy and the evaluation

criteria and activities of NRC at a glance in its annual report.

Findings: As per the Bangladesh Bank Circular BRPD(R-1) 717/2021-5064 dated 16 June 2021

no such committee is possible to form without the instructions from Bangladesh Bank. As per the

circular formation of such committee clearly contradicts with the rules of Bank Company Act

1991 and instructions of Bangladesh Bank. So no NRC is formed by the Board of Dutch Bangla

bank limited, AIBL, Prime bank and Brac Bank.

49
2. 7. External or Statutory Auditors

7(1) The issuer company shall not engage its external or statutory auditors to perform the

following services of the company, namely:

7(1)(i) Appraisal or valuation services or fairness opinions.

7(1)(ii) Financial information systems design and implementation.

7(1)(iii) Book-keeping or other services related to the accounting records or financial statements.

7(1)(iv) Broker-dealer services.

7(1)(v) Actuarial services.

7(1)(vi) Internal audit services or special services;

7(1)(vii) Any other service that the Audit Committee determines;

7(1)(viii) Audit or certification services on compliance of corporate governance as required

under condition No. 9(1);

7(1)(ix) Any other service that may create conflict of interest.

7(2) No partner or employees of the external audit firms shall possess any share of the company

they audit at least during the tenure of their audit assignment of that company; his or her family

shall not hold any shares in the said company.

7(3) Representative of external or statutory auditors shall remain present in the Shareholders’

Meeting (Annual General Meeting or Extraordinary General Meeting) to answer the queries of

the shareholders;

50
 Dutch
Bangla
AIBL
bank
limited

Brac Bank
Prime bank

Findings: Dutch Bangla bank limited, AIBL and Brac bank applied this provision but not Prime

bank followed this.

51
2. 8. Maintaining a website by the company

8(1) The company shall have an official website linked with the website of the stock exchange.

8(2) The company shall keep the website functional from the date of listing.

8(3) The company shall make available the detailed disclosures on its website as required under

the listing regulations of the concerned stock exchange(s).

Applied Code

Dutch Bangla Brac AIBL Brac

Findings: Dutch Bangla bank limited, AIBL and Brac bank applied this provision but not Prime

bank followed this.

52
2. 9. Reporting and Compliance of Corporate Governance.

(1) The company shall obtain a certificate from a practicing Professional Accountant/Secretary

(Chartered Accountant/ Cost and Management Accountant / Chartered Secretary) other than its

statutory auditor or audit firm on yearly basis regarding the compliance of conditions of the

Corporate Governance Code of the Commission and shall such certificate shall be disclosed in

the Annual Report.

(2) The professional who will provide the certificate on compliance of Corporate Governance

shall be appointed by the Shareholders in the AGM.

(3) The directors of the company shall state, in accordance with the Annexure-C attached, in the

directors’ report whether the Company has complied with these conditions or not.

Prime bank

Dutch Bangla
Brac
AIBL
bank
bank limited

Findings: Dutch Bangla bank limited, AIBL and brac bank applied this provision but not Prime

bank followed this.

53
CHAPTER 3: RECOMMENDATION

The guidelines listed below should be put into practice for Bangladesh to have effective

corporate governance.

3.1. Increasing the Board of Directors' competence

A company's main strength is its board of directors. And the financial industry proves it beyond a

doubt. The capability of the board of directors determines whether a company succeeds or fails.

Every facet of a firm requires ongoing decision-making by the Board of Directors. In order to

avoid significant losses for the business, they must first determine whether the decision they are

about to make is the appropriate one. The board of directors needs to develop their skills and

attributes so they can handle pressure and make decisions that benefit the business.

3.2. Ensuring accurate and reliable financial reporting

It is necessary to guarantee the quality and accuracy of financial reporting. The reports

frequently give the stakeholders incomplete information, which causes information asymmetry.

Bangladesh has a sufficient number of accounting laws and rules, but the conditions for their

implementation are unsuitable. Employees frequently commit accounting fraud. Independent

auditors must be guaranteed. The banking industry should provide auditors with a suitable work

environment so they can make the best conclusions. The safety of the auditors must come first.

54
because they are threatened by numerous parties with an interest. Additionally, auditors are

required to adhere to their profession's code of ethics. They need to be moral. The reports will be

accurate and impartial if these things can be done.

3.3. Total policy implementation

The corporate governance policy in Bangladesh has several shortcomings. And the immoral

individuals look for ways to profit from the policy's shortcomings. A corporate governance

policy should be put into place by the government. The policy should be created in a fashion that

allows for both quantitative and qualitative evaluation. The policy ought to be flexible for the

time being, dynamic, and conducive to ongoing economic growth.

3.4. Institutional Capacity Building

It is regrettable that none of Bangladesh's corporate institutions are adequately prepared to apply

corporate governance principles and rules in their organizations. A strong corporate framework

helps guarantee an organization's fairness and transparency. Market manipulation must end

immediately. The parties involved need to exercise more caution. The media may be very helpful

in conveying the real picture of corporate entities.

55
3.5. Enhancing the Penalties and Rules to Follow the Rules

Government should create enough policies and ensure that the institutions uphold them in order

to maintain stakeholder confidence. Any entity that violates the law should face consequences.

3.6. Ensuring the strongest corporate governance practices

Many of Bangladesh's neighbors, including India, Pakistan, and Sri Lanka, have developed

strong corporate governance. For the benefit of the country's economy, Bangladesh must practice

corporate governance. A code of conduct and corporate governance principles have been adopted

by the ICAB and the SEC, however, our nation's banking industry does not adhere to them. The

banking firms act of 1991 requires the government of Bangladesh to take the required actions to

ensure that corporate governance standards are met in the banking industry.

56
3.7. Raising the Bar for Ethics

Several reports depict the actual state of Bangladesh's banking industry. Many tasks, including

data gathering, analysis, developing presentation rules, etc., must be completed in order to create

the reports. Bangladesh's government banking industry is a complete shambles. In Bangladesh,

not even the annual reports of government-owned banks are accessible. And they are unwilling

to discuss the inconsistencies occurring in the banks. The reports generated as a result are

insufficient for the stakeholders. Always some things are missing. Therefore, it is important to

raise the ethical bar so that stakeholders can understand the issue clearly and reports may be

made in their entirety. Overall, transparency and fairness will be improved if ethical standards

are raised.

57
CHAPTER 4: CONCLUSION

Due to its connections to all other sectors, the banking sector provides a comprehensive picture

of a nation's economy. It is crucial in emerging nations like Bangladesh, where the economy is

currently shifting from one centered on agriculture to one based on industry. To contribute to the

nation's economic development, banks must function at their peak level of efficiency. Any

deficiency or even a small amount of volatility in this area would have a devastating long-term

impact on the nation's development. The main prerequisite for an effective and stable banking

system is the presence of solid corporate governance and its right practices. Corporate

governance needs special attention on a priority basis in a country like Bangladesh where

prudential legislation and supervision are insufficient to provide a safety net for the bank

stakeholders and depositors. Except for a small number of foreign and private commercial banks,

most other banks do not have effective asset management and credit analysis procedures.

Insufficient creditor rights execution has increased both the categorized and non-performing loan

numbers. The Bangladesh Bank has launched a number of steps to enhance bank asset quality

conditions.

The banking industry is essential to the growth of a nation's macroeconomics as well as its

microeconomics. The talk that was just had demonstrates the current state of the banking

industry in Bangladesh. It demonstrates unequivocally that the financial industry is in jeopardy.

It might crumble at any time. Several banks have already failed.

The Bangladesh Bank should be an important part of managing all banks. The approval of new

banks should be carefully considered. Political meddling ought to be reduced. Rules for loan

58
sanctioning should be strict and unambiguous. It is possible to believe that Bangladesh will soon

experience true improvement in the banking industry, as well as hopefully in other areas.

CHAPTER 5: REFERENCE

 Committee, C.G. (2018a). Code of Best Practice for Corporate Governance, Governance

of board of directors in subsidiary company. SSRN Electronic Journal, 3(1).

doi:10.2139/ssrn.192170.

 Corporate governance code of director. (2018a). Accounting principles, 89(5), pp.991–

1006. doi:10.1511/j.1540-879867876860766.x.

 External or Satutory Auditors. (2018a). 12th ed. bangladesh.

 Maintaining a website by the company, Corporate Governance Code. (2018b). USA.

 NRC Code of Corporate governance of bangladesh. (2018b). Journal The business

juction, 6(4), p.158. doi:10.26r59879893/thekgkhehgi2.744.

 Reporting and compliance of corporate governance. (2018b). Budgeting Control,

1878(1), pp.7–9. doi:10.1007/s40278-087587587676094-1.

59
60