BB links bank MDs’ pay, reappointment to performance

The Bangladesh Bank (BB) has introduced a 100-mark performance scoring system to assess the managing directors (MDs) and chief executive officers (CEOs) of commercial banks.

The new system will judge bank chiefs on five areas �" capital strength and liquidity management, asset quality, profitability, corporate governance and internal control, and customer service, financial inclusion and market management.

The central bank issued the policy titled “Key Performance Indicators (KPIs) Framework for Managing Director/Chief Executive Officer (CEO) of Banks” on Sunday.

Under the framework, bank boards will set specific performance targets for MDs and CEOs at the time of their appointment or reappointment. The targets will be included in their employment contracts and reviewed every six months.

The 100 marks will be divided into 25 marks for capital strength and liquidity management, 25 for asset quality, 10 for profitability, 25 for governance and internal control, and 15 for customer service, financial inclusion and market management.

The performance indicators will include loan-to-advance ratio, classified loans, monitoring of large and top borrowers, and targets for recovering classified and written-off loans.

Bank boards will have to submit performance reports to Bangladesh Bank within 15 days after the end of each six-month period. They can choose one of four assessment periods �" January-June, April-September, July-December or October-March.

For existing MDs and CEOs, the first assessment will be based on their performance over the previous three months. The next six-month assessment will cover October 2026 to March 2027.

A bank chief will effectively get zero in any particular area if he or she scores less than half of the marks allocated for that area, according to the policy.

The framework will also have a direct impact on the pay and benefits of bank chiefs. Their salary, incentives and other facilities will be linked to the targets set by the board and the performance shown in the periodic assessment.

For MD appointments, banks will have to set targets for a three-year period. In cases of reappointment, the BB will examine the performance report against the targets previously set by the board.

The move comes at a difficult time for the banking sector, with weak asset quality, high classified loans, liquidity pressure in some banks and concerns over governance. 

By making the performance of bank chiefs measurable, the central bank is seeking to put greater responsibility on both bank boards and top management.
The new system means that an MD’s performance will no longer be judged only by profit or business growth. 

The quality of loans, recovery of bad debts, liquidity management, governance and treatment of customers will also count when the board and the central bank assess the bank’s top executive.