Bangladesh Bank sets new test for bank MDs

Bangladesh Bank has introduced a new system to check the performance of managing directors (MDs) and chief executive officers (CEOs) of banks.

Under the new system, bank chiefs will be assessed every six months based on around 30 indicators. Those who score below 65 out of 100 will be marked as “below average”.

They may first receive a warning. If their performance does not improve, they may be removed from their posts.

Bangladesh Bank sent the new performance assessment rules to the chairmen of all scheduled banks on Sunday.

The assessment will cover five main areas — the bank’s financial strength and cash position, loan quality, good governance and internal control, financial inclusion and customer service, and profit.

The first three areas will carry 25 marks each. Financial inclusion, customer service and market conduct will carry 15 marks, while profit will carry 10 marks.

The performance of bank chiefs will also be judged by the amount of defaulted loans, loan recovery, the loan-to-deposit ratio and whether loans are too heavily given to a few big customers.

Following Bangladesh Bank’s rules, anti-money laundering measures, customer service and lending to sectors such as small businesses, agriculture and green projects will also be considered.

Those scoring 75 or more will be called “above average”, while those scoring 65 to below 75 will be considered “average”.

Up to five marks may also be deducted if a bank chief fails in six specific areas.

The new system will apply to both new and serving MDs and CEOs. New bank chiefs will also have to prepare a work plan and get it approved by Bangladesh Bank.

The first assessment of serving bank chiefs will cover their performance from September to March.

Former Bank Asia managing director Arfan Ali welcomed the move but said assessing them once a year could be better than every six months.