The central bank has requested the securities regulator to amend or fine-tune its directives issued under the corporate governance code (CGC) for the listed banks and financial institutions (FIs).
Formed and operated under different laws, the banks and FIs have no scope to comply with such directives, the Bangladesh Bank (BB) pointed out in a recent letter to the Bangladesh Securities and Exchange Commission (BSEC).
The directives under the code contradict the directives and rules under the laws relevant to the bank companies and FIs, according to the letter sent to BSEC chairman Prof. Shibli Rubayat Ul Islam.
On the other hand, the BSEC chairman said there was no scope to scrap or amend the CGC meant for ensuring better governance in all the listed companies including banks and FIs.
In response to these varied standpoints, experts have suggested reaching a consensus or seeking guidance from the law ministry in this regard.
The BSEC had issued the mandatory CGC on June 10 in 2018 that included formation of a nomination and remuneration committee (NRC) by listed companies.
But, insiders said the central bank did not recognise such a body due to absence of a provision in this regard in the relevant laws of banking companies and FIs.
They said the Bank Companies Act, 1991 and Financial Institutions Act, 1993 have the provisions about formation of only two committees - audit committee and executive committee.
Bangladesh Association of Publicly Listed Companies (BAPLC) has long been urging the regulators to remove the ambiguity in the compliance issues of the listed companies.
Prof. Shibli argued that the CGC was issued to ensure better governance and management of the banks and FIs.
"The code-related directives were issued for all the listed companies. So, there is no scope of scrapping or amending the directives only for the listed banks and FIs," he told the FE.
He also raised question about the performances of listed banks as compared to the listed companies of other sectors. "The performances of the banks will be better if they comply with the CGC."
Asked, the former chairman of the securities regulator Faruq Ahmad Siddiqi said the two regulators should sit together to reach a consensus on the issue.
"Either they (the regulators) should compromise or the matter should be referred to the ministry of law, seeking their guidance," Mr. Siddiqi said.
He also suggested avoiding conflicts between the two regulators for the greater interest of both money and stock markets.
According to the CGC, the NRC is supposed to assist the board of directors of the companies to formulate 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 and top level executives. The NRC shall comprise of at least three members, including an independent director.
The securities regulator imposes conditions under the section 2CC of the Securities and Exchange Ordinance, 1969.
In its letter, the central bank said that in the section 2CC, the securities regulator has been offered with the priority of imposing conditions at a limited scale.
"It's not lawfully right to impose conditions, which contradict with the acts of bank and financial institutions, on the companies which are run by the depositors' money," the central bank said.
The section 2CC reads, Notwithstanding anything contained in companies act 1994, or in any other law for the time being in force, or in any contract or any Memorandum and Articles of Association of any company, any consent or recognition accorded under section 2A, section 2B or section 2C, whether before or after the commencement of this section, shall be subject to such conditions, if any, as the Commission may, from time to time, think fit to impose.
When contacted, officials concerned refused to make any comment on the letter sent to the securities regulator. The BB's spokesperson could not be reached either.
Contacted, vice president of BAPLC Riad Mahmud said they demanded of the authorities concerned to remove the ambiguity. "The listed companies cannot be penalised for the contradictory issue," he said.
He added that the market-friendly securities regulator must take measures in dissolving the problems being faced by the listed companies.
Asked, a deputy managing director (DMD) of a leading non-banking financial institution said that they (the NBFIs) cannot overlook with the laws under which the central bank plays its oversight role.
"The securities regulator can also take measures against them due to non-compliance with the CGC," he said.
