Bangladesh Bank Sets 2% Minimum Stake for Board Nominees
Bangladesh Bank mandates a 2% minimum equity stake for corporate nominees on bank boards. The new rule caps ownership at a company's net worth.
The central bank of Bangladesh has introduced a 2% minimum shareholding requirement for corporate nominees on commercial bank boards. This figure applies to listed public limited companies. For other types of companies, the required stake is 20%. The directive takes effect immediately.
A new circular restricts total bank shareholding to a company's net worth based on acquisition cost. Entities currently holding shares above this limit have six months to adjust their portfolios. The measure aims to prevent investments that exceed a shareholder's financial capacity.
Eligibility Rules Tighten for Board Members
Representative directors nominated by shareholder companies must serve as managing directors or directors. They must also meet the specific equity stake thresholds. Banks are required to obtain prior approval from the regulator for any appointment or replacement of these nominees.
Financial institutions must submit documents proving the nominee's required equity stake. The directive is issued under Section 45 of the Bank Company Act, 1991. A senior official stated the goal is to ensure transparency and protect depositors.
Regulatory Focus on Ownership Transparency
The new guidelines aim to improve stability in bank ownership structures. They seek to align board representation with actual financial exposure. The rules create a direct link between equity stakes and governance rights.
Compliance Deadline Set for Existing Holders
Companies holding bank shares above the new net-worth limit face a six-month adjustment period. They must reduce their holdings to comply with the circular. This period allows for orderly market adjustments without disrupting banking operations.
The central bank emphasizes that these measures protect the broader financial system. By capping ownership relative to net worth, the regulator limits potential systemic risk. The rules apply to all commercial banks operating within the jurisdiction. Source: GN auto markets/bonds: corporate bonds.
