BRPD Circular No. 14: Strengthening the Law Department/Legal Team of Banks

Bangladesh Bank Head Office Motijheel, Dhaka-1000 Bangladesh. Ref No.: BRPD-Regulation & Policy 04 August 2024 BRPD Circular No.-14 Date: ------------------ 20 Sraban 1431 To: Managing Director / Chief Executive Officer All Scheduled Banks operating in Bangladesh

Dear Sir,

Context of Strengthening the Law Department/Legal Team of the Bank

The role of the Bank's Law Department/Legal Team is extremely important in integrating the recovery program for overall loan management. A significant portion of the existing non-performing loans in the banking sector is currently pending in loan courts. Additionally, writ petitions have been filed against many non-performing loans in the High Court Division/Appellate Division of the Honorable Supreme Court. Strengthening the Bank's Law Department/Legal Team will enable it to take appropriate legal steps against these cases, thereby playing a helpful role in the speedy resolution of cases pending in loan courts and the High Court Division/Appellate Division of the Honorable Supreme Court. Consequently, on one hand, the number of cases pending in court will decrease, and on the other hand, through sound loan management and recovery of non-performing loans, the rate of classified loans will decrease, and the bank's financial capacity will increase. In this changing context, to implement the Commercial Strategy Roadmap (CSR) declared for the country's banking sector and to bring momentum to non-performing loan recovery, the following instructions must be followed to ensure responsible and operational initiatives by the Bank's Law Department/Legal Team (however it may be named):

2. Structure of the Law Department/Legal Team:

a) A Chief Legal Officer (CLO) must be appointed under the direct supervision of the Bank's Managing Director or Chief Executive Officer. He/She will be responsible for formulating necessary policies, strategies, and procedures for the speedy resolution of pending loan cases;

b) The Chief Legal Officer must hold a Bachelor of Laws (LL.B) degree from a recognized university and have at least 5 years of work experience in the Law Department/Legal Team of a bank or financial institution, along with at least 10 years of experience in case management. Furthermore, preference must be given to those holding Bar-at-Law, Master of Laws (LL.M), PhD degree, or specialized higher degrees in Law;

c) The Law Department/Legal Team must employ the necessary number of skilled staff based on the number of cases pending in loan courts and the High Court Division/Appellate Division of the Honorable Supreme Court, and the amount of outstanding loans against them. However, at least one-third of the staff employed in the Law Department/Legal Team must hold a law degree and have experience in banking.

d) Considering the abundance in the number and amount of pending loans in Dhaka and Chittagong, a Deputy General Manager (DGM) must be appointed for these two regions;

e) The Chief Legal Officer must submit a monthly progress report of pending cases to the Bank's Managing Director or Chief Executive Officer, and the Law Department/Legal Team must present a progress report at the Bank's Executive Committee meeting quarterly;

f) The necessary number of staff/clerks must be employed in the Law Department/Legal Team to provide administrative and research assistance to the legal staff, manage files, prepare cases, and coordinate with the Bank's panel lawyers;

g) Arrangements must be made for regular training of the staff employed in the Law Department/Legal Team to achieve excellence in law;

h) Targets must be set semi-annually for the resolution of the Bank's pending loan-related cases, and special incentives must be provided for staff who achieve such targets.

3. Eligibility for Appointment of Panel Lawyers:

a) Must hold a Bachelor of Laws (LL.B) degree from a recognized university. Furthermore, preference must be given to those holding Bar-at-Law, Master of Laws (LL.M), PhD degree, or specialized higher degrees in Law;

b) Must be a member of the Bangladesh Bar Council or the relevant Regional Bar Association;

c) Skilled lawyers who handle cases in Administrative Tribunals, Administrative Appellate Tribunals, and the High Court Division and Appellate Division of the Honorable Supreme Court must be given preference;

d) Must have at least 3 years of experience in handling cases in Civil, Criminal, Bankruptcy courts, or other loan courts. Lawyers with experience representing banks and financial institutions in court proceedings, arbitration, mediation, and alternative dispute resolution forums must be given preference;

e) In the case of panel lawyer appointments by banks where the classified loan rate is 10% or more, at least 50% of the panel lawyers must have previous experience representing the bank or financial institution;

f) A lawyer can be included in the panel for a maximum period of 2 years. However, upon evaluation of the performance of the panel lawyer three months prior to the expiration of the term, they may be re-included in the panel;

g) A lawyer who has been sentenced to imprisonment for 1 year or more for a criminal offense will not be eligible for panel inclusion. If a panel lawyer is sentenced to imprisonment for at least 1 year in a criminal case, that lawyer must be removed from the panel without delay;

h) Except for the reasons mentioned in clause (g) above, if a panel lawyer is removed from the panel for any reason contrary to the bank's interest, that lawyer cannot be re-included in the panel for the next 3 years;

i) If a bank's lawyer is removed from the panel, arrangements must be made to immediately transfer the cases being handled by that lawyer to another panel lawyer.

4. Performance Evaluation of Panel Lawyers:

The performance of the Bank's panel lawyers must be evaluated on a quarterly basis. The evaluation should consider the volume and rate of case resolution, provision of timely and standard legal opinions, rate of appearance in court and direct case management, maintenance of communication with the relevant branch/office of the case, and other professional qualifications.

5. Banks will formulate their own policies considering the above matters as minimum criteria.

6. Islamic Shariah-based banks will formulate their own policies in light of the above policies to strengthen their non-performing investment recovery program.

7. These instructions are issued under the powers granted by Section 45 of the Bank Company Act, 1991.

8. These instructions will come into force immediately.

Yours faithfully,

(Mohammad Shahriar Siddique) Director (BRPD) Phone: 9530252