New boardrooms, old practice: Bank MDs in the hot seat

Infograph: TBS

Highlights:

• Managing directors face high turnover in Bangladesh's private banks
• Five MDs resigned in three months amid board conflicts
• Fourteen banks changed MDs since August, many under pressure
• Political influence drives disputes over loan rescheduling and waivers
• Interim leadership in banks risks weakening public trust and stability
• Whistleblowers lack protection; disclosures often leaked, careers jeopardized

For decades, the role of managing director at a bank has been the pinnacle of a banking career in Bangladesh. But in the nation's private banking sector, this top job has become a precarious "hot seat", with a high turnover rate signalling deep-seated governance issues.

The recent change in government has brought intense scrutiny to the banking industry. The central bank has begun tightening oversight on financial irregularities, leading to the restructuring of more than a dozen bank boards and placing top executives directly in the firing line.

In a startling trend, five managing directors of private commercial banks have resigned in the last three months alone, citing "personal reasons." However, insiders reveal that the true cause is often conflict with newly appointed boards. 

One notable case involved a veteran banker credited with transforming a top-performing institution, who was forced out prematurely due to what sources described as excessive interference from a new board member.

Several managing directors have already been removed, while others still holding their posts find themselves under mounting pressure.

This wave of resignations is part of a larger pattern. Since August last year, 14 out of 43 private banks have seen a change in their MD. While some were removed following investigations into irregularities from the previous regime, others resigned voluntarily. A few even fled the country or were jailed for collusion.

Currently, ten banks are being run by MDs on a "current charge" basis, with two more set to be vacated soon. This includes the recent departures of Nuruddin Md Sadeque Hossain of Southeast Bank and Kazi Ahsan Khalil of Meghna Bank. 

Khalil, who resigned just 15 months into a three-year contract, claimed he was put on leave without reason. 

Kazi Ahsan Khalil said, "The new board suddenly decided to put me on leave without showing any reason. I chose to resign. If the Bangladesh Bank investigates, many more things will come out."

In March this year, Bangladesh Bank dissolved Meghna Bank's board and appointed independent directors alongside shareholder directors. Two of the appointees are former officials of Bangladesh Bank.

The turmoil has caught the attention of industry experts. Muhammad A (Rumee) Ali, a former deputy governor of Bangladesh Bank, called the resignations an "unhealthy trend," noting that many of the departing MDs were competent professionals who had passed the central bank's due diligence.

"The central bank should investigate why these resignations are happening," said Ali, who is also chairman of the Commission on Banking of ICC Bangladesh.

He added that having so many banks run by interim chiefs could erode public trust.

Why MDs at odds with boards

The root of the conflict often lies in unchanged boardroom practices. Despite the reshuffles, newly appointed MDs report facing the same political pressure as their predecessors. 

Board members, often aligned with political factions, continue to push for irregular loan rescheduling and interest waivers. Resisting these demands can cost an MD their job.

For instance, one banker recounted how a politically connected company demanded to reschedule a Tk31 crore loan across ten banks while also seeking a complete waiver of interest and a portion of the principal.

Bangladesh Bank's loan reschedule committee reportedly instructed banks to handle the case "softly," triggering friction with executives unwilling to comply.

"Board members still act like owners of banks, though 90% of the money comes from depositors," one MD told The Business Standard.

Bankers also said the proposed reform – requiring 50% independent directors on bank boards – is being fiercely opposed by the Bangladesh Association of Banks.

Regime changed, harassment remains

Executives also complain that their careers are being derailed by arbitrary removals. One MD of a bank tied to the controversial S Alam Group was placed on forced leave last October under Bangladesh Bank orders – without any proven allegations.

The banker said the delayed release from his post kept him out of work for over a year. "I had no such offence, but I was sidelined under pressure. Neither the bank nor the central bank brought charges. Random removals are leaving large banks without capable leadership."

Whistleblowers left exposed

Although Bangladesh Bank encourages MDs to report undue pressure from boards under its whistleblower policy, executives say confidentiality is rarely maintained.

One banker recounted that disclosures he made to the central bank were later leaked, forcing his resignation. At another bank, his resistance to political pressure over loan approvals led to his contract not being renewed.

"There is no real protection for whistleblowers," another MD said. "The same boardroom practices continue under new faces. Even some senior central bank officials are politically influenced."

Experts argue that Bangladesh Bank must establish a dedicated, confidential whistleblower protection unit to shield executives from retaliation.

In an article published in TBS, advocate and rights activist Kollol Kibria said that despite its noble intent, the Public Interest Information Disclosure (Protection) Act, 2011 – commonly known as the whistleblower protection act – has significant gaps: inadequate protections for whistleblowers and weak enforcement mechanisms. 

To make it effective, he suggested, Bangladesh Bank needs to establish a dedicated Whistleblower Protection Office under its authority.