B Mirror Desk : At present, among the 36 banks listed on the stock exchange, 9 banks lack a Managing Director (MD) and Chief Executive Officer (CEO). Out of these, 6 banks have had their MDs placed on mandatory leave due to allegations of corruption and misconduct, while 3 banks have either seen their MDs resign or have a vacancy following the conclusion of their terms. Additionally, an executive director from Bangladesh Bank is currently acting as MD for one of the banks.

The 9 banks without an MD include Islami Bank, Al-Arafah Islami Bank, Exim Bank, Global Islami Bank, First Security Islami Bank, National Bank, One Bank, Southeast Bank, and ICB Islami Bank. Notably, an executive director from the bank is fulfilling the role of MD at ICB Islami Bank as part of the interim management.

Reason behind the crisis: Corrupt leadership stumbled in the clean-up drive

The government and Bangladesh Bank have launched a clean-up drive against corruption and irregularities in the banking sector for more than a decade. As part of this, top officials were removed, resigned and sent on compulsory leave one after another. Central bank officials have been appointed as interim management in several banks.

Challenges and business stagnation

This vacuum is affecting the daily activities of the banks, including business decision-making, loan disbursement, and investment evaluation. Even the new chairmen of the banks are unable to play an effective role in many areas.

New policy: Priority to qualified MDs over incompetent MDs

Bangladesh Bank is currently following strict policies in appointing MDs. To become an MD, you need at least 20 years of banking experience, be over 45 years of age, have good reputation, and be able to pass an oral examination. The appointment period has also been reduced to 3 years instead of 5 years.

More changes are coming

The term of the current MDs of BRAC, Dutch-Bangla, Eastern, and Midland Bank will end within the next year. As a result, new leadership will be needed in these banks as well, which may further exacerbate the crisis.

Major challenges in the banking sector

1. Unrestrained growth in non-performing loans
2. Slowdown in loan disbursement and reduced capacity
3. Declining net income
4. Inability to maintain required capital

The MD crisis within the banking sector is not merely a deficiency in leadership; it signifies a more profound structural issue. To address this predicament, the reform initiatives implemented by the government and the central bank need to be sustainable, ensuring that this cycle does not recur in the future.