Corporate Governance and Ethics

for Sustainable Banking.

Md. Ali Hossain Prodhania
Supernumerary Professor, BIBM
Former Managing Director
Bangladesh Krishi Bank
What is Corporate Governance?

 Corporate governance is a system of policies, processes and rules that direct and control a
business’s behaviour. It is the framework that defines the relationship between
shareholders, management, the Board of Directors and other key stakeholders. Corporate
governance policies need to be enforceable and applied consistently.
 Governance fosters a culture of integrity and leads to a positive performing and
sustainable business.
 The Board of Directors plays a vital role in the development of corporate governance
policies and to integrate with management and other stakeholders
What is ethics in Banking?

 Ethics can be defined as a system of criteria and measures examining the

values, norms and rules underlying the individual and social relations on such
moral grounds as right and wrong
or good and bad
 but anything that is legal is not necessarily ethical.
Why Governance & ethics is important in Banking?

 Bank is a financial intermediary.

 Bank deals with depositor’s/public money.
 Bangladesh financial market is bank based.
 Maturity transformation.
 Involved in risky business.
 Business of Public confidence and Trust.
 Competitiveness and growth.
 Trade-off in-between liquidity and profitability.
ways to implement Governance.

 Ensure a balanced, competent and diverse Board.

 Review of Board composition on a regular basis.
 Build solid foundations for oversight .
 Gear key performance indicators towards long term value creation.
 Prioritise risk management.
 Ensure integrity in corporate reporting.
 Provide timely and balanced information.
 Emphasise integrity, promote ethical behaviours and consult different categories of stakeholders
on their interests.
 Treat shareholders equitably and respect their rights.
 Ensure adequate disclosures.
Corporate Governance principles for Banks
 13 principles recommended by Basel Committee on Banking
Supervision (BIS).

 1. Board’s overall responsibilities.

 2. Board’s qualifications and composition.
 3.Board’s own structure and practices.
 4.Senior management.
 5.Governance of group structure.
 6.Risk management function.
 8.Risk communication
Corporate Governance principles for Banks

 9.Compliance
 7.Risk identification, monitoring and controlling.
 10.Internal audit.
 11.Compensation.
 12. Disclosure & transparency.
 13. The role of supervisors.
Role of Central Bank in Governance

 Formation of Board of Directors

 Responsibilities & Authorities of Board of Directors
 Work Planning & Strategic Management
 Credit Risk Management
 Internal Control Management
 Human Resource Management & Development
 Financial Management
 Appointment of Chief Executive Officer (CEO)
 Meeting of the Board
Role of Central Bank in Governance

 Responsibilities of the Chairman of the Board of Directors

 Formation of Committees from Board of Directors
 Executive Committee
 Audit Committee
 Risk Management Committee
 Power of the Bangladesh Bank to Dismiss the Board of Directors (BCA 1991, Sec # 47)
 Internal Controls and Compliance
General principles of ethics.

 Integrity
 Neutrality
 Reliability
 Transparency
 Fight against ALM and CFT
 Confidentiality
 Public disclosure
 Personal movement
 Competition
 Relations of banks with their customers
 Compliance
Some Governance issues for sustainable
banking.
 Fair return to the depositors.
 Sustainable spread between cost of funds and lending rates.
 Transparent accounting practices.
 Comply with relevant laws, rules and regulations of regulator.
 Develop effective risk management culture.
 Treat clients with due courtesy.
 Deliver services efficiently and promptly.
 Protect interest of minority share holders.
 Set up role/functions of Board, key management & effective monitoring.
 Prioritise socially desirable and environment friendly projects.
Some Governance issues for sustainable
banking.
 Treat employees fairly and compassionately.
 Training and development of service providers.
 Maintain asset quality.
 Maintain adequate capital .
 Maintain required provisions.
 Financial inclusion with quality access to credit.
 Reschedule problem loans according to it’s merit.
 Avoid risky or speculative deals or investment with customer’s money.
 Ensure Financial Inclusion and quality access to credit both in rural & urban.
 Innovative banking and adoption of technology.
Basic areas of HRM

 Human Resource Acquisition

 Training and Development
 Maintenance of Human Assets
 Development of Leadership
 Motivation & punishment
 Development of Ethical Leaders
Human Resources strength of all banks
Source: BIBM review on HRM of Banks 2021).

Particulars 2019 2020 2021 Change

%over 2019
Total Number of employees 178430 183206 188019 5.37%
Male 149950 154828 157878 5.29%
Female 28480 28378 30141 5.83%
Total Number of Banks 59 61 61 3.39%
Total Number of Branches 10578 10752 10937 3,39%
Total Deposits (Crore) 1214445 1379150 1512472 24.54%
Total Advances (Crore) 1003548 1096308 1210589 20.63%
Employees Each Bank 3024 3003 3082 1.92%
Employees per branch 17 17 17 0.00%
Deposit Per Employee Crore) 6.81 7.53 8.04 18.06%
Advance Per Employee 5.62 5.98 6.44 14.59%
 Any questions?

Thanks a lot for patience hearing.