If someone has 25 years of work experience as a first-class officer in a financial regulatory agency, they too can now become the MD or top executive of a commercial bank. Bangladesh Bank has recently added such a provision regarding the appointment of Managing Director (MD) and Chief Executive Officer (CEO) of banks. For several major reasons, this decision by Bangladesh Bank cannot be supported.
Although there are indeed some genuinely talented people in Bangladesh Bank, BSEC, ministries, and other financial regulatory agencies – many of whom are qualified to become MDs and CEOs of commercial banks – the issue is not a question of qualification. It is about creating a legal basis for such an important matter in a country where, when a political government comes to power, the opportunity to become governor based on political considerations still fully exists.
Where is our fully autonomous central bank? Think about a situation where the current governor, Ahsan H Mansur, is no longer in this position, and on the other hand, central bank autonomy has still not arrived. Then someone with a special political agenda becomes governor. In that situation, if someone who is not a commercial banker gets a legal opportunity to sit as MD in any bank, what bad things could happen? Some may say, if the government wants something bad, who can stop it anyway?
There are more questions. A person starts his career as an officer in a commercial bank, develops himself over long experience. His dream is to one day sit in the top executive position and do better for the bank and the country. Everyone wants to climb to the top rung of their professional ladder. So that banker becomes DMD, then Additional MD, and just when it is time for him to become MD, the position is taken away by an outsider? Would that be morally right?
And will a person from outside the banking sector, suddenly becoming MD, be able to earn the trust of the board and work together to build a good bank? Besides, if this provision becomes effective, the possibility of favouritism in the selection of MDs will increase. In selection interviews, central bank officials may show extra sympathy toward colleagues they have known for years. Will the top level of the central bank always have honest and competent officials like now?
What happens if that is not the case during a political government? And then if any corrupt board of a bank, wanting to please Bangladesh Bank and BSEC, proceeds toward appointing an unqualified person as MD?
Another major issue of concern is that MDs are fundamentally the owners of the bank’s profit and loss (P&L) account. A bank is a business – a risky business. The MD leads that business. Before I became MD, I had 24 years of business experience. But regulatory officials generally do not have experience in this business activity. They are primarily associated with compliance or enforcement of rules. How will they suddenly, as MDs, immerse their minds into the paradigm of balance sheets, P&L, creating and marketing new products, and ultimately harvesting profit?
Previously, in Sonali, Janata, Bangladesh Commerce Bank and Union Bank we have seen MDs being appointed from the central bank. Mahbubur Rahman Khan became MD of Sonali Bank from Deputy Governor of Bangladesh Bank, and later again returned as Deputy Governor. If such people are found, that is good. But alongside a few good exceptions, how much harm has been done in this country through government intervention?
It is also being said that former officials of regulatory agencies can become bank MDs. Yet at present, a bank MD has to wait five years after retirement before becoming a director of another bank. But former regulators will become eligible right after retirement? That is also a kind of discrimination.
Finally, I know the mind-set of the honourable governor. This former top IMF official is very modern in his thinking. He wants all sectors of society to be open to all talented people. I also want that. But before full autonomy of the central bank arrives, embracing this ‘unconventional’ idea is extremely dangerous.
Because our society is neither good nor bad –our society is essentially a dangerous one.
Mahsrur Arefin is the Chairman of the Association of Bankers, Bangladesh (ABB), and the MD & CEO of City Bank