BB orders banks not to treat dissolved boards as automatically restored

The Bangladesh Bank (BB) has instructed all scheduled banks not to treat the dissolution of a bank’s board of directors as automatically ending after a fixed period.
In a clarification issued on Monday, the central bank said the legal provision concerning the expiry of a board dissolution order under Section 47(2) of the Bank Company Act, 1991, will generally not apply to banking companies.

The instruction, issued by the Banking Regulation and Policy Department (BRPD) under the authority of Section 121 of the Bank Company Act, has been sent to the managing directors and chief executive officers of all scheduled banks for immediate compliance.

In simple terms, if Bangladesh Bank removes the board of a troubled bank because of serious irregularities or weak governance, the board cannot automatically regain its authority simply because the period specified in the original order has expired. The board will remain dissolved until Bangladesh Bank determines that the bank is stable enough and that it is appropriate to restore or appoint a new board.

Earlier, the law left room for confusion over whether a dissolved board could regain its authority after the specified period expired. Through the clarification, Bangladesh Bank has made it clear that its decision to dissolve a board will remain in effect unless the central bank decides otherwise.

The move comes as several banks are still operating under Bangladesh Bank-appointed administrators following loan scams, governance failures and financial distress.

The clarification gives the central bank stronger legal backing to continue reforms, restructuring and oversight of weak banks without the risk of former directors automatically returning to power before corrective measures are completed.