BRPD Circular No. 03: Appointment of Independent Directors of a Bank-Company and their Duties, Responsibilities and Honorarium

Ref No: BRPD.Circular.No.03 Bangladesh Bank Head Office Motijheel, Dhaka-1000 Banking Regulation and Policy Department Bangladesh

BRPD Circular No. - 03 Date: ----------------------- 14 February 2024

To, Chairman, Board of Directors and Managing Director/Chief Executive Officer All Scheduled Banks operating in Bangladesh

Dear Sir,

Subject: Appointment of "Independent Directors" in Bank-Companies and their Duties, Responsibilities and Honorarium.

It is essential for the Board of Directors of a bank to be composed of suitable and professionally competent individuals to formulate bank policies, conduct banking operations smoothly, and ensure good corporate governance. The primary source of a bank's funds is the deposits placed by depositors with the bank. Consequently, maintaining and preserving the confidence of depositors is indispensable for a bank-company. The responsibilities of independent directors are more significant than those of other directors, as they must act independently and solely to protect the interests of the bank's depositors. To avoid conflicts of interest and protect depositor interests, it is necessary to have clear policies regarding the appointment of independent directors. To achieve the aforementioned objectives, the following policies are hereby provided for banks to follow regarding the appointment of independent directors in bank-companies and the determination of their duties, responsibilities, and powers:

2. Definition of Independent Director: According to the explanation in Section 15(9) of the Companies Act, 1991, "Independent Director" means "a person who is independent of the management and shareholders of the bank-company and who shall give his own opinion solely in the interest of the bank-company and who has no past, present or future actual or apparent interest in the bank or with any person connected with the bank."

3. Number of Independent Directors: According to Section 15(9) of the Companies Act, 1991, or any other currently effective law, or whatever is contained in the Memorandum or Articles of Association of any bank-company, the maximum number of directors in any bank-company shall be 20 (twenty), including not less than 3 (three) independent directors: Provided that, if the number of directors in a bank-company is below 20 (twenty), the number of independent directors shall be not less than 2 (two).

4. Experience and Suitability: a) The concerned person must have a minimum of 10 (ten) years of managerial, commercial, or professional experience for appointment as an Independent Director. b) The minimum age of the concerned person for performing duties as an Independent Director shall be 45 (forty-five) years and the maximum age shall be 75 (seventy-five) years. c) He/She must hold a Bachelor's or Master's degree from a recognized university in Accounting, Banking, Finance, Business Administration, Law, Accounting, or related subjects. In the case of appointing an Independent Director for a new Digital Bank, higher academic education in Information Technology will be considered as an additional qualification. d) Experienced teachers in the Faculty of Business Education or Business Administration, Management, Law, and Information Technology of Government, Non-Government, or Autonomous Universities, persons engaged in the legal profession, persons with professional degrees in Accounting engaged in the accounting profession, experienced bankers, and experienced officers of the Commercial Ministry, Ministry of Finance (Public Enterprises Division and Finance Division), Ministry of Industries, and Ministry of Law will be considered on a priority basis. e) No person involved in any past, present, or future actual or apparent interest with any bank or bank-related person can be an Independent Director of that bank. f) No member of the family of the person nominated for appointment as an Independent Director in a bank-company may hold shares in the said bank-company, nor may they be employed in any lucrative position in the said bank-company. g) A person nominated as an Independent Director cannot be appointed as a director on behalf of any other bank-company, financial institution established under the Finance Companies Act, 2023, insurance company, or any subsidiary company of such companies. Furthermore, the nominated Independent Director cannot serve as a director on behalf of any company or institution that exercises control, joint control, or significant influence over the said bank-company, financial institution, or insurance company. h) The nominated Independent Director has not been convicted of any criminal offense, nor is he/she involved or has been involved in fraud, financial crime, or other illegal activities. i) There is no adverse observation or remark in the court's judgment regarding the nominated Independent Director in any civil or criminal case. j) The nominated Independent Director was not involved in any illegal activity while performing duties in banking or his/her profession. k) The nominated Independent Director has not defaulted on the payment of dues to any creditor, nor has he/she obtained exemption from recovering dues through settlement with creditors, nor is he/she a willful defaulter. l) The nominated Independent Director cannot be a tax defaulter. m) The nominated Independent Director has not been declared insolvent by any court at any time. n) A person listed as a willful defaulter by any bank or any financial institution established under the Finance Companies Act, 2023, will not be eligible to become a director of any bank until 05 (five) years have passed since obtaining exemption from the said list. o) The nominated Independent Director has not been convicted for violating any rules, provisions, policies, or codes of conduct of any regulatory authority (Regulator) related to the financial sector. p) The nominated Independent Director was not associated with the ownership of any company/institution whose registration/license has been cancelled or which has been dissolved.

5. Financial Benefits: A person performing duties as an Independent Director of a bank-company shall be entitled to the following financial and other benefits: a) Independent Directors of the bank-company shall be entitled to a permanent honorarium of 50,000 Taka (subject to applicable tax deduction) per month. b) They shall be entitled to an honorarium of up to 10,000 Taka (subject to applicable tax deduction) for attending each meeting of the Board of Directors/auxiliary committees of the bank-company. c) Regardless of the number of meetings of the Board of Directors and other auxiliary committees of the bank-company held in a month, such honorarium shall be entitled for attending up to 02 (two) meetings of the Board of Directors, 04 (four) meetings of the Executive Committee, 01 (one) meeting of the Audit Committee, and 01 (one) meeting of the Risk Management Committee per month. d) They shall be entitled to hotel accommodation and travel expenses for up to 02 (two) days to come to the Head Office/meeting venue from any other divisional/district city within the country for participating in Board/Auxiliary Committee meetings. e) The concerned director must submit original receipts for travel expenses and hotel accommodation payment (e.g., travel tickets, airline tickets, hotel accommodation bill payment receipts/vouchers, etc.) and the bank must preserve the submitted proofs.

6. Duties, Responsibilities, and Accountability of Independent Directors: a) He/She shall ensure proper compliance with the Companies Act, 1991, and other relevant laws and regulations in the management of the bank. b) He/She shall inform Bangladesh Bank appropriately of any information regarding the violation of the Companies Act, 1991, or any other law/regulation by the Board of Directors. c) He/She shall participate in Board meetings and provide thoughtful opinions on the agendas raised in the Board meetings. If any memorandum is raised by the Independent Director, the Board of Directors must consider it with importance. d) According to BRPD Circular No. 02, dated 11 February 2024, if he/she becomes a member of any other auxiliary committee of the Board of Directors, he/she shall faithfully and properly perform the duties, responsibilities, and instructions of the committees mentioned in the said circular. e) If the opinion of the Independent Director in the Board or various auxiliary committees of the Board is not given due importance, or if any irregularity is observed in the management of the bank, he/she shall inform the Department of Offsite Supervision of Bangladesh Bank and the Banking Regulation and Policy Department in writing. f) If any complaint against the Independent Director is proven during an inspection conducted by Bangladesh Bank, or if adverse observations are found due to negligence of duty, action shall be taken against him/her according to the Companies Act, 1991. g) The Independent Director must be elected as the Chairman/Chairperson of the Audit Committee of the bank. The term of the Chairman/Chairperson of the Audit Committee shall be 03 (three) years. No Independent Director can serve as the Chairman/Chairperson of the Audit Committee for two consecutive terms. h) He/She shall always strive to protect the interests of the Board of Directors, depositors, and general shareholders (excluding directors).

7. Term of Office and Removal of Independent Director: a) Generally, Independent Directors shall be appointed for a term of 03 (three) years and may be reappointed for a subsequent term upon expiration of the term, subject to the provisions of Section 15 of the Companies Act, 1991. b) The Board of Directors may request Bangladesh Bank to remove the concerned Independent Director by citing specific reasons. c) An Independent Director may resign from the position of Independent Director by giving 07 (seven) days' notice. d) Bangladesh Bank may remove any Independent Director by citing specific reasons.

8. Prior Approval of Bangladesh Bank for Appointment of Independent Director: According to the provisions of Section 15(4) and (5) of the Companies Act, 1991, prior written approval of Bangladesh Bank must be obtained for the appointment/re-appointment of Independent Directors. For such prior approval, the full curriculum vitae of the concerned person(s), relevant certificates, and a copy of the Board's approval, along with a proposal signed by the Managing Director/Chief Executive Officer of the bank, must be submitted to Bangladesh Bank. The person nominated for the said position must submit declaration forms according to 'Appendix-A', 'Appendix-B', 'Appendix-C', and 'Appendix-D' along with the attached Form No. 1 and Form No. 2 of the 'Undertaking' to Bangladesh Bank.

Bangladesh Bank will provide approval for the appointment of the required number of Independent Directors through interviews conducted by a committee formed under the leadership of the Deputy Governor in charge of the Banking Regulation and Policy Department of Bangladesh Bank to verify the experience and suitability of the proposed person(s) by the bank-company.

9. The other relevant instructions regarding director appointment in BRPD Circular No. 02, dated 11 February 2024, shall also apply in the case of appointment of Independent Directors.

10. Those persons who have been appointed as Independent Directors prior to the issuance of this circular may continue to perform their duties as Independent Directors until their term is renewed.

11. These instructions shall not apply to those foreign banks that are operating/will operate banking business in Bangladesh by establishing branches.

12. These instructions are issued under the powers conferred by Section 15(9) of the Companies Act, 1991.

13. These instructions shall come into force immediately.

Yours faithfully,

Enclosure: As per list.

(Md. Harun-Or-Rashid) Director (BRPD) Phone-9530095

Appendix-A Information of the person nominated/elected/re-elected for appointment as Independent Director

1. Name:
2. Father's Name:
3. Mother's Name:
4. Nationality:
5. (a) Date of Birth: (b) Place of Birth:
6. Permanent Address: (a) Permanent Address (with telephone number): (b) Current Address (with telephone number):
7. National ID Number: 8. TIN Number:
8. Marital Status: (a) Name of Husband/Wife if married: (b) Profession of Husband/Wife: (c) Nationality of Husband/Wife: (d) NID of Husband/Wife:
9. Family Members (Wife/Husband, Father, Mother, Son, Daughter, Brother, Sister, and Dependent Person): Name | Relation | Date of Birth | If Director of any Bank/Financial Institution, Name and Address of that Institution
10. Educational Qualification: (a) Academic Education: (b) Professional/Technical Education: (c) Training/Seminar:
11. Description of Current Profession: (a) Name and Address of Institution: (b) Nature of Business: (c) Designation: (d) Phone Number:
12. Description of Experience: Name and Address of Institution | Period of Duty (Date of Joining - Date of Completion of Duty) | Designation | Duties and Responsibilities
13. Description of Institution/Company where 10% or more shares are held or appointed as Director: Name and Address of Institution/Company | Relation with Institution/Company (Director/Shareholder) | Nature of Institution/Company (Public/Private Limited) | Nature of Business | Percentage of Shares Held (%)
14. Period of holding as Independent Director (From the date of first appointment to the date of last appointment/re-appointment):
15. Disqualification (According to Section 15(2) of the Companies Act, 1991):
16. Has any loan facility been taken from any Bank/Financial Institution/Other Source? If taken, Name of Bank/Financial Institution and Amount of Loan (including interest and principal):

Signature: Date and Name:

Appendix-B Declaration

1. I hereby declare that - I am eligible for appointment as Independent Director of the bank-company according to the qualifications and suitability mentioned in Section 15(6) of the Companies Act, 1991, other provisions of the Companies Act, 1991, and the provisions mentioned in BRPD Circular No. 02 issued by Bangladesh Bank on 11 February 2024. I further declare that - a) I have at least 10 (ten) years of managerial, commercial, or professional experience; b) I have not been convicted by any court of any criminal offense, nor have I been or am involved in any fraud, financial crime, or other illegal activities; c) There is no adverse observation/remark in the court's judgment regarding me in any civil or criminal case; d) I have not been convicted for violating any rules, provisions, or codes of conduct of any regulatory body related to the financial sector; e) I was not associated with the ownership of any company/institution whose registration/license has been cancelled or which has been dissolved; f) I have no default loan with any bank or financial institution in my own name or in the name of any institution related to my interest; g) I have never been declared insolvent by any court; h) I am not employed as a director or advisor/counsel or in any other lucrative position of any other bank-company, financial institution, insurance company, or any subsidiary company of such companies; i) I am not employed as an external auditor, legal advisor, advisor, counsel, or in any other lucrative position of ---------------- Bank PLC; j) I have never been removed from the position of Chief Executive, Chairman, or Director of any company, especially a bank or financial institution, nor has the position been made vacant; k) I am not a tax defaulter personally or for a sole proprietorship or partnership firm; l) I or any member of my family is not/are not involved in the management or operation of this bank.

2. According to Section 93 of the Companies Act, 1994, I hereby declare that, if I am appointed as Independent Director of ---------------- Bank PLC, I am willing to perform this duty.

Signature: Date and Name:

Witness (Bank Officer): 1) Signature: Name: Designation: Address: 2) Signature: Name: Designation: Address:

Appendix-C Confidentiality Declaration

I, the undersigned, hereby assure that - if I am appointed as Independent Director of ------------------ Bank PLC, I will not disclose to any person directly or indirectly any matter submitted for my consideration or any matter brought to my notice as a director during the performance of my duties as a director. However, I will disclose it only if it is necessary for the performance of my duties, or if required by the provisions of existing law, or if empowered by the Board.

Signature: Date and Name:

Witness (Bank Officer): 1) Signature: Name: Designation: Address: 2) Signature: Name: Designation: Address:

Appendix-D Declaration of the Nominated Candidate as Independent Director

The undersigned declares that I am not associated with the management of ------------------ Bank PLC and neither I nor any member of my family holds/shares in the said bank. I will give my own opinion solely in the interest of the bank-company. I further declare that I have no past, present, or future actual interest or apparent interest in the said bank or with any person related to the bank.

Signature: Date and Name:

Witness (Bank Officer): 1) Signature: Name: Designation: Address: 2) Signature: Name: Designation: Address:

Undertaking - 1 (Declaration of Assets and Liabilities)

Declaration of Assets and Liabilities

1. Name (Father's/Husband's Name): ---------------- / ---------------- / ---------------- / ---------------- / ---------------- Address * ---------------- ----------------

2. Nationality (Father's/Husband's Name): ---------------- / ---------------- / ---------------- / ---------------- / ---------------- Address ---------------- ----------------

3. Description of Profession: Occupation (Government/Private/Non-Government/Own Business):

   ---

   ---

4. Description of Family Members

   • If any, please mention.

5. Name of Father * ----------------

6. Name of Mother * ----------------

7. Name of Wife/Husband * ----------------

8. Name of Son/Daughter ----------------

9. Name of Brother/Sister ---------------- (10/17 Forms)

10. Address ----------------

11. Date of Birth (DD/MM/YY) * 8. TIN Number ----------------

12. Address of Birth * 10. Date of Birth * ----------------

Undertaking - 2 (Declaration of Criminal Cases/Civil Cases/Defaults)

Declaration of Criminal Cases

Name (Father's/Husband's Name): ---------------- / ---------------- / ---------------- / ---------------- / ---------------- Address * ---------------- ----------------

Nationality (English Name): ---------------- / ---------------- / ---------------- / ---------------- / ---------------- Address ---------------- ----------------

Description of Family Members

• If any, please mention. ** If any, please mention the details of Criminal, Civil, Commercial, Trade, or Financial Cases.

1. Name of Father * ----------------
2. Case Number * ----------------
3. Address * ----------------

Annexure

Name: Designation: Address:

To, The Chief Executive Officer/Managing Director/General Manager of ............................................, Subject: Declaration of Assets and Liabilities of Mr./Ms./Mrs. ............................................

Sir/Madam,

I, ............................................, son/daughter/wife of ............................................, residing at ............................................, hereby declare that I have no assets or liabilities in my own name or in the name of any institution related to my interest. I further declare that I have not been convicted of any criminal offense, nor have I been involved in any fraud, financial crime, or other illegal activities. I further declare that there is no adverse observation in the court's judgment regarding me in any civil or criminal case. I further declare that I have not been convicted for violating any rules, provisions, or codes of conduct of any regulatory body related to the financial sector. I further declare that I was not associated with the ownership of any company/institution whose registration/license has been cancelled or which has been dissolved. I further declare that I have no default loan with any bank or financial institution in my own name or in the name of any institution related to my interest. I further declare that I have never been declared insolvent by any court. I further declare that I am not employed as a director or advisor/counsel or in any other lucrative position of any other bank-company, financial institution, insurance company, or any subsidiary company of such companies. I further declare that I am not employed as an external auditor, legal advisor, advisor, counsel, or in any other lucrative position of ---------------- Bank PLC. I further declare that I have never been removed from the position of Chief Executive, Chairman, or Director of any company, especially a bank or financial institution, nor has the position been made vacant. I further declare that I am not a tax defaulter personally or for a sole proprietorship or partnership firm. I further declare that I or any member of my family is not/are not involved in the management or operation of this bank.

I further declare that, if I am appointed as Independent Director of ---------------- Bank PLC, I am willing to perform this duty.

Signature: Date and Name:

Witness (Bank Officer): 1) Signature: Name: Designation: Address: 2) Signature: Name: Designation: Address:

• If any, please mention.