Corporate Governance in Banking Sector of Bangladesh

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|Chapter 1: Background of the paper |

1.1 Introduction

Globalization of financial markets and fears of financial instability have brought the issue of the corporate governance into forefront of the policy discussions. In an increasingly deregulated policy environment, the big corporate failures have raised the need for implementing competent corporate governance practices. The recent financial crises in different countries have verified how the lack of good governance practices in the financial institutions can lead to a crisis in the system leaving long-term consequences to the. Among the financial institutions, the corporate governance of banks has received very little attention only. In developing countries, banks have a dominant position in the financial systems and a discussion on corporate governance of banks required special attention.

1.2 Objectives of the Paper

The main objective of this paper is to assess the corporate governance practices in the banking sector of Bangladesh. The study targets to identify the practices in different CG issues e.g. level of commitment to good corporate governance, effective board practices, control environment and processes, information disclosure and transparency, and shareholders rights. More specifically, the objectives of the study are to:

• Investigate the commitment to implement good corporate governance practices among the banks in Bangladesh. • Know the role, duties and responsibilities, composition, structure, practices, and performance evaluation and training of the members of Board of Directors • Identify the control environment and processes of the banking sector of Bangladesh • Determine the level of disclosures, the accuracy and timeline of the financial position, condition and prospects, and other non-financial information of the banks in Bangladesh. • Be familiar with the rights of the shareholders in the banking sector • Finally, to develop a set of policy recommendations for addressing the major concerns derived from the analysis.

1.3 Implication of the study

The banking sector played a significant role for the socio-economic development of Bangladesh since its independence e.g. the largest source of finance, generated a significant pool of talented human resources by providing jobs, and significantly contributed to 1.3% of the country’s Gross Domestic Product (GDP). This study will be helpful for knowing the current status of the CG in the banking sector and also be helpful to identify the areas where actions are necessary to improve the governance in the banking sector.

1.4 Methodology

1.4.1 Survey Instrument
The survey used a semi-structured questionnaire to collect the information on the CG practices in the banking sector of Bangladesh. The questionnaire was prepared after an extensive review of the different international CG guidelines and methodology, and research papers by the global experts and institutions on CG. The questionnaire asked information in different areas of corporate governance practices including the level of commitment to ensure good corporate governance, board practices, control environment and processes, information disclosure and transparency, and shareholders rights.

1.4.2 Sampling and Data Collection
For this research, commercial banks listed in DSE were approached to complete the questionnaire. Both the hard and soft copies of the questionnaire were sent to the Banks officials for completing the survey. In addition, one-to one semi-structured interview were also conducted when necessary. Follow-up phone calls were made both for setting up interview with those companies that wanted to be interviewed and also to collect the questionnaire shortest possible time. The study is based on both primary and secondary sources of information. The data were analyzed using Microsoft Access,...
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