An initiative to impose limits on the shareholding of individuals, family members and various institutions in bank companies has faced strong opposition from bank owners, reports Daily Sun.
In the draft amendments, Bangladesh Bank has proposed that no individual, family member or institution, directly or indirectly, may hold more than 5 percent shares in multiple banks simultaneously.
Considering recent negative experiences in the banking sector, the central bank seeks to include this provision to reduce the influence of vested interest groups over bank companies.
To gather opinions, the Financial Institutions Division (FID) of the Ministry of Finance held a meeting last Wednesday, chaired by FID Secretary Nazma Mobarek. The meeting proposed adding three new sub-sections to Section 14Kha of the Bank Company Act-2025. The main objective is to prevent any person or institution from exerting influence over multiple banks at the same time.
Proposed changes include:
• Large shareholdings in multiple banks will not be allowed. The same individual, family or institution will not be permitted to hold significant shares in more than one bank simultaneously, whether singly or jointly.
• If an individual or institution holds 2 percent or more of the total shares in one bank, they will not be allowed to hold 2 percent or more in another bank at the same time.
• Voting rights will be capped at 5 percent. Except for the government, non-profit institutions and strategic institutional investors, even if someone holds more than 5 percent shares in a bank, their voting rights will remain limited to 5 percent.
The current Bank Company Act does not impose any restrictions on holding shares in multiple banks. Generally, an investor can hold up to 10 percent shares, and the “one share, one vote” principle is in effect.
Sources from the meeting said that representatives of the Bangladesh Association of Banks (BAB) strongly opposed the proposed shareholding limits. BAB argued that ordinary shareholders do not influence bank policy decisions; rather, it is the board of directors that exerts control.
Since a proposal has already been made to reduce the number of members from the same family on bank boards, BAB believes there is no justification for imposing additional limits on shareholdings by individuals, families and companies.
On the other hand, Bangladesh Bank officials stated at the meeting that a large business group holding majority shares in six banks had caused extensive damage to the country’s banking industry. Due to their substantial control, they influenced policy decisions and looted thousands of crores of taka, leaving hundreds of thousands of depositors in distress. At the end of last year, the government had to inject Tk 20,000 crore from public funds to compensate depositors of five merged private banks.
FID Secretary Nazma Mobarek said more time is needed to finalize the proposed amendments to the Bank Company Act. Differences remain between the central bank and BAB regarding limits on shareholdings in multiple banks. She added that both Bangladesh Bank officials and BAB representatives have been asked to reach a consensus before the next meeting.
BAB has proposed that the term “family” should mean only husband, wife and dependent members, and that the maximum shareholding limit for a single family should be increased to 25 percent. If the definition of family is broadened, genuine entrepreneur families would be unnecessarily restricted. BAB urged that the law should not be made overly strict through reform.
Bd-Pratidin English/ AM
