2021 - Responsibilities of The Board of Directors

RESPONSIBILITIES OF THE BOARD OF DIRECTORS:
To ensure good governance in the bank management it is essential to have specific

demarcation of responsibilities and authorities among controlling bodies over bank
affairs. In the Bank Company Act, 1991 (amended upto 2013) the newly included
Section 15(kha) & (ga) give responsibility to the board of directors for establishing
policies for the bank company, for risk management, internal controls, internal audit
and compliance and for ensuring their implementation.
1.1. Responsibilities and Authorities of the Board of Directors:

a) Work-planning and strategic management:
i. The board shall determine the objectives and goals and to this end shall chalk
out strategies and work-plans on annual basis. It shall specially engage itself in the
affairs of making strategies consistent with the determined objectives and goals and
in the issues relating to structural change and reformation for enhancement of
institutional efficiency and other relevant policy matters. It shall analyze/monitor, at
quarterly rests, the development of implementation of the work-plans.
ii. The board shall have its analytical review incorporated in the Annual Report as
regards to the success/failure in achieving the business and other targets as set out in
its annual work-plan and shall apprise the shareholders of its opinions/
recommendations on future plans and strategies. It shall set the Key Performance
Indicators (KPIs) for the CEO & officers immediate two tiers below the CEO, and have
it evaluated from time to time.
b) Credit and risk management:

i. The policies, strategies, procedures etc. in respect of appraisal of
loan/investment proposal, sanction, disbursement, recovery, reschedule and write-off
thereof shall be made with the board's approval under the purview of the existing
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laws, rules and regulations. The board shall specifically distribute the power of
sanction of loan/investment and such distribution should desirably be made among
the CEO and his subordinate executives as much as possible. No director, however,
shall interfere, direct or indirect, into the process of loan approval.
ii. The board shall frame policies for risk management and get them complied
with and shall monitor the compliance at quarterly rests and review the concerned
report of the risk management team and shall compile in the minutes of the board
meeting. The board shall monitor the compliance of the guidelines of Bangladesh
Bank regarding key risk management.
c) Internal control management:

The board shall be vigilant on the internal control system of the bank in order to attain
and maintain satisfactory qualitative standard of its loan/investment portfolio. The
board will establish such an internal control system so that the internal audit process
can be conducted independently from the management. It shall review the reports
submitted by its audit committee at quarterly rests regarding compliance of
recommendations made in internal and external audit reports and the Bangladesh
Bank inspection reports.
d) Human resources management and development:

i. Policies relating to recruitment, promotion, transfer, disciplinary and punitive
measures, human resources development etc. and service rules shall be framed and
approved by the board. The chairman or the directors shall in no way involve
themselves or interfere into or influence over any administrative affairs including
recruitment, promotion, transfer and disciplinary measures as executed under the set
service rules. No member of the board of directors shall be included in the selection
committees for recruitment and promotion to different levels. Recruitment, promotion,
transfer & punishment of the officers immediate two tiers below the CEO shall,
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however, rest upon the board. Such recruitment and promotion shall have to be
carried out complying with the service rules i.e., policies for recruitment and
promotion.
ii. The board shall focus its special attention to the development of skills of
bank's staff in different fields of its business activities including prudent appraisal of
loan/investment proposals, and to the adoption of modern electronic and information
technologies and the introduction of effective Management Information System (MIS).
The board shall get these programs incorporated in its annual work plan.
iii. The board will compose Code of Ethics for every tier and they will follow it
properly. The board will promote healthy code of conducts for developing a
compliance culture.
e) Financial management:
i. The annual budget and the statutory financial statements shall be finalized with
the approval of the board. It shall at quarterly rests review/monitor the positions in
respect of bank's income, expenditure, liquidity, non-performing asset, capital base
and adequacy, maintenance of loan loss provision and steps taken for recovery of
defaulted loans including legal measures.
ii. The board shall frame the policies and procedures for bank's purchase and
procurement activities and shall accordingly approve the distribution of power for
making such expenditures. The maximum possible delegation of such power of
expenditures shall rest on the CEO and his subordinates. The decision on matters
relating to infrastructure development and purchase of land, building, vehicles etc. for
the purpose of bank's business shall, however, be adopted with the approval of the
board.
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iii. The board will review whether an Asset-Liability Committee (ALCO) has been
formed and it is working according to Bangladesh Bank guidelines.
f) Appointment of Chief Executive Officer (CEO):

In order to strengthen the financial base of the bank and obtain confidence of the
depositors, one of the major responsibilities of the board of directors is to appoint an
honest, efficient, experienced and suitable CEO or Managing Director. The Board of
directors will appoint a suitable CEO with the approval of the Bangladesh Bank.
g) Other responsibilities of the Board:
The board should follow and comply with the responsibilities assigned by Bangladesh
Bank.
1.2. Meeting of Board:

Board of directors may meet once or more than once in a month if necessary. But
Board of directors shall meet at least once in every three months. Excessive meetings
are discouraged.
1.3. Responsibilities of the Chairman of the Board of Directors:

a) As the chairman of the board of directors or chairman of any committee formed by
the board or any director does not personally possess the jurisdiction to apply policy
making or executive authority, he/she shall not participate in or interfere into the
administrative or operational and routine affairs of the bank.
b) The chairman may conduct on-site inspection of any bank-branch or financing
activities under the purview of the oversight responsibilities of the board. He may call
for any information relating to bank's operation or ask for investigation into any such
affairs; he may submit such information or investigation report to the meeting of the
board or the executive committee and if deemed necessary, with the approval of the
board, he shall affect necessary action thereon in accordance with the set rules
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through the CEO. However, any complaint against the CEO shall have to be apprised
to Bangladesh Bank through the board along with the statement of the CEO.
c) The chairman may be offered an office-room, a personal secretary/assistant, one
peon/MLSS, one telephone at the office, one mobile phone to use inside the country
and a vehicle in the business-interest of the bank subject to the approval of the board.
2. Formation of committees from the Board of Directors:

Each bank company can form 1(one) executive committee, 1(one) audit committee
and 1(one) risk management committee with the directors. Board can’t form any other
permanent, temporary or sub- committee except the above mentioned three
committees.
2.1. Executive committee:
Executive committee should be formed with the members of the board to continue the
urgent and daily or routine works between the intervals of two board meetings.
Executive committee will perform according to their terms of reference determined by
the board of directors.
a) Organizational structure:
i. Members of the committee will be nominated by the board of directors from
themselves;
ii. The executive committee will comprise of maximum 07 (seven) members;
iii. Members may be appointed for a 03 (three)-year term of office;
iv. Chairman of the Board of Directors can be the chairman of executive committee;
v. Company secretary of the bank will be the secretary of the executive committee.
b) Qualifications of the Members:

i. Integrity, dedication, and opportunity to spare time in the functions of committee will
have to be considered while nominating a director to the committee;
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ii. Each member should be capable of making valuable and effective contributions in
the functioning of the committee;
iii. To perform his or her role effectively each committee member should have
adequate understanding of the detailed responsibilities
RANGE OF BOARD RESPONSIBILITIES
Each director individually and the board collectively should consider themselves
responsible for the effective and efficient management of the bank.
FROM OPERATIONAL POINT OF VIEW

Safety and Soundness of operation
The Board is responsible for monitoring and ensuring that the management of the
operation is conducted in a safe and sound manner.
• Asset Quality – loan policy, Provision/ allowance for loan & lease losses,
monitoring asset quality and maintain adequate ratios
• Capital – required capital levels, components of capital, capital adequacy
guidelines, sources of capital and monitoring of capital level
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• Earnings – quality of earnings, trends, budgets, factors that affect earnings and
monitoring on earnings
• Liquidity – sources of liquidity, liquidity policies, monitoring liquidity and frequently
used ratios
• Management – director’s role, bank governance, succession planning, business
continuity planning, evaluating management and board meetings
• Sensitivity to market risk – interest rate risk, impact of interest rate changes, asset
/ liability management policy
ENTERPRISE RISK MANAGEMENT

The Board is responsible for monitoring and ensuring that the management of the risk
is conducted in a safe and sound manner. The Board sets the risk appetite and the
guidelines through board approved policies that govern the management of the risk.
Those guidelines include risk management objectives, risk tolerance limits,
delegations of authority and the content and frequency of reports provided to the
Board to monitor the risk. Ultimately, the Board is accountable for the system of
internal controls and that responsibility cannot be delegated to others within the
organization or to outside parties.
RISK & GOVERNANCE LEVEL:

The processes, policies, and structures that underpin effective identificationand
management of risk, under which the board:
 set the bank’s strategy and objectives;
 protect the interests of depositors, meet shareholder obligations, and take into
account the interests of other recognized stakeholders
 Understands the risks the bank faces, internally and externally;
 Ensures that the board receives the information it needs to monitor strategies
andperformance and continually assess the implications.
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 determine the bank’s risk tolerance/appetite;
 align corporate activities and behavior with the expectation that the bank
willoperate in a safe and sound manner, with integrity and in compliance with
applicable
 ensure compliances of laws and regulations
 Accepts that managing risk is the board’s ultimate responsibility
FROM FINANCIAL STATEMENTs POINT OF VIEW
Although increasing responsibility now rests with audit committees for vetting financial
statements and discussing them with the auditors, the ultimate duty to ensure that any
reports issued by the bank, including the financial statements, present a true and fair
view of its position and performance still rests with the board as a whole. Whatever
advice they receive and whatever the formal requirements, it is not acceptable either
by statements or omissions to knowingly present a misleading picture.
CONTROLS
In relation to controls and the control environment director’s duties are:
 To ensure that the board receives periodical reports about the financial
position of the bank and its performance in the form (including the degree of
detail) and at intervals most appropriate to its business.
 To monitor progress towards the bank’s objectives (this will often be set in the
context of performance against budgets).
 To ensure that its operations are properly controlled and to this end to set and
enforce clear lines of accountability and responsibility throughout for
identifying, managing, and reporting on risk
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 To ensure that there are sound systems for decisionmaking and control and
that the systems are effective by having them regularly tested and reported
upon.
 To ensure that the managerial responsibility for each system is in sound hands
and that managers know the risks they ‘own’.
 To ensure there is an effective internal audit arm with a direct reporting line to
the CEO and the right of access at all times to the chairman of the audit
committee.
 To receive reports from the auditors, management, and the audit committee on
material breaches of laws, rules, and supervisory regulation (including
instructions from the regulatory authority which may come in the form of formal
or informal administrative action) and ensure that management takes the
necessary action
 To ensure that managers address all security-related matters and receive
expert advice on the design, planning, and implementation of security
standards, procedures, and systems covering all aspects of physical and
technical security aimed at safeguarding the assets and operations of the
bank. Breaches should be reported, and serious incidents or shortcomings
should be brought to the attention of the board.
 To establish clear written policies in regard to Treasury operations and receive
reports regularly on them together with any breaches of these policies.
 To establish clear written rules on investments and require regular reports in
respect of them.
 To ensure that written rules are promulgated to prevent fraud and deal with it if
it is suspected or discovered. Frauds and suspected frauds should be reported
at once, and in any case management should be required to report any
incidents at six monthly intervals.
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 It is the board’s task to establish the policies within which loans are granted
and monitored, and to make sure that the bank has the appropriate structures,
procedures, and lines of reporting and clear definition of responsibilities.
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RESPONSIBILITIES OF THE BOARD OF DIRECTORS:

To ensure good governance in the bank management it is essential to have specific

1.1. Responsibilities and Authorities of the Board of Directors:

b) Credit and risk management:

c) Internal control management:

d) Human resources management and development:

f) Appointment of Chief Executive Officer (CEO):

1.2. Meeting of Board:

1.3. Responsibilities of the Chairman of the Board of Directors:

2. Formation of committees from the Board of Directors:

b) Qualifications of the Members:

RANGE OF BOARD RESPONSIBILITIES

FROM OPERATIONAL POINT OF VIEW

ENTERPRISE RISK MANAGEMENT

RISK & GOVERNANCE LEVEL:

FROM FINANCIAL STATEMENTs POINT OF VIEW

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