Corporate Governance - Dutch-Bangla Bank
Transcript of Corporate Governance - Dutch-Bangla Bank
corporate governance
Corporate Governance is the system of internal
controls and procedures used to define and
protect the rights and responsibilities of various
stakeholders. The Bank has adequately complied
with all the Corporate Governance Guidelines of
Bangladesh Bank and SEe. It is ensured by the
Board that all activities and transactions of the
Bank are conducted in compliance with
international best practices to protect the
highest interest of all the stakeholders.
Internal control, transparency andaccountability
Maximizing value for shareholders through
performance with good governance is the
responsibility of corporate management. In line
with the best practice, the corporate governance
systems and practices in DBBL are designed to
ensure adequate internal control in operational
process, transparency and accountability in
doing business; and proper and timely
disclosures in financial reporting so that value is
maximized for all the stakeholders.
Responsibilities are segregatedbetween the board and management
Responsibilities and functions are segregated in
a way to strike the right balance between the
Board and the Management. The Board provides
leadership and direction of the Bank, approves
strategic plans and major policy decisions and
supervises performance of the management.
The Board is responsible for ensuring and
encouraging compliance, ethical standard and
integrity throughout DBBL.
Proper delegation of authority
The Bank has a policy for delegation of authority.
Accordingly, authorities are delegated to CEO,
other senior management and cross functional
management committees comprising head of
functional divisions and senior management to
review achievements of key objectives. The
Board has also clearly delegated authorities to
Board Committees with specific terms of
reference which sets out their objectives and
responsibilities.
The Board
The Board is comprised of directors having
diverse skills, experience and expertise to add
value towards better corporate governance of
the Bank and maximizing value for all
stakeholders.
The Board discharges its responsibilities itself or
through various committees. The Board meets on
a regular basis to discharge its responsibilities.
The Board is made up of 8 directors including a
non-executive chairman and 3 non-executive
directors representing
independent director,
depositors and one
director as follows:
shareholders, one
two directors from
executive managing
Mr. Zahid Hossain Khan: Chairman
Mr. Sayem Ahmed
Mrs. Frey -Tang Yuen Mei, Barbara: Nominee of Ecotrim Hong Kong Limited
Mr. Md. Fakhrullslam: Elected from General Public Shareholders' group
Dr. Irshad Kamal Khan: Independent Director
Dr. Syed Fakhrul Ameen: Director from the Depositors
Mr. Chowdhury M. Ashraf Hossain: Director from the Depositors
Mr. K. Shamshi TabrezEx-officio Director (Managing Director)
Chairman of the BoardThe non-executive Chairman of the Board is fully
independent of the Managing Director (CEO) of
the Bank.
Independent Director and DepositorDirector
Independent Director
DBBL has one independent director in the Board
of the Bank. In compliance with corporate
governance guidelines of SEC, Dr. Irshad Kamal
Khan was appointed as an independent director in
the Board of the Bank. Dr. Khan is a Professor of
Department of Economics, Chittagong University.
Depositor Director
DBBL has two depositor directors in the Board of
the Bank. In compliance with corporate
governance guidelines of Bangladesh Bank, Dr.
Syed Fakhrul Ameen and Mr. Chowdhury M.
Ashraf Hossain were appointed as Directors
representing depositors of the Bank. Mr. Ameen
is a Professor of Department of Civil Engineering
in Bangladesh University of Engineering and
Technology and Mr. Hossian is a businessman
having a Masters Degree in Journalism.
Key objectives of the directors
The Board is responsible for ensuring
governance and performance of the company by
directing and overseeing activities of the
executive management by making them
transparent, accountable and responsible. The
directors are expected to protect the long term
interest of the shareholders and all stakeholders
by setting key objectives for the management
and by monitoring and ensuring that those
objectives are achieved by the management in a
sustainable way while maintaining transparency
and accountability at every stage of operations.
The Board must be satisfied that sufficient risk
management systems are in place to mitigate
core risks of the Bank and that there are
adequate checks and balances in the internal
control system to protect the value and quality
of assets of the Bank.
The Board of Directors is entitled to timely,
accurate and adequate information & data to
ensure effective control over operational,
financial, strategic, compliance, governance and
risk management issues of the Bank.
The Board is responsible for ensuringthe following
• Setting key targets of the Bank and
monitoring progress towards
achievement of such targets.
• Approval of major policy decisions and
long term strategic plans to achieve
key objectives in an efficient and
effective way.
• Disclosure of accurate, timely and
reliable information to shareholders.
They are expected to
• Demonstrate the highest professional
and ethical standard.
• Be fully independent from management.
• Be knowledgeable about the business
and challenges that DBBL is facing.
• Apply prudence and judgment in
decision making.
• Display commitments to the Bank and
its all stakeholders through
participation in the affairs of the Bank.
Number of Board Meeting held in 2011
Number of Board Meetings held in 2011 and the
attendance of each Director are shown in
Annexure-A of Corporate
Guidelines of SEe.
Governance
The Committees of the Board of Directors
As per Bangladesh Bank guidelines, the Board
has two committees namely the Executive
Committee and the Audit Committee. Each
Committee operates under specific Terms of
Reference (TOR) that sets out its responsibilities
and composition.
The TORs are designed and reviewed to ensure
that the objectives of each committee are
achieved in an effective way and that regulatory
obligations and obligation to shareholders are
fulfilled. The Committee regularly evaluates
progress towards key objectives. Accordingly,
time and efforts are dedicated to focus on
responsibilities those are central to achieve the
core objectives of respective committees.
Executive Committee of the Board
The Executive Committee of the Board is
comprised of the following members.
Mr. Sayem Ahmed
Mr. Zahid Hossain Khan
Mr. K. Shamshi Tabrez
Chairman
Member
Member
Responsibility of Executive Committee
The responsibility of Executive Committee of the
Board is clearly delegated by the Board.
Accordingly, the EC exercises all the powers and
functions on behalf of the Board in regard to:
• approving credit proposals, monitoring
risk status and quality of loan portfolio,
• administrative affairs and
• financial affairs
However, all policy matters and strategic issues
are dealt with by the Board of Directors of the
Bank.
Audit Committee of the Board
The Audit Committee of the Board is comprised
of the following non-executive members of the
Board:
Mr. Sayem Ahmed
Mr. Zahid Hossain Khan
Dr. Irshad Kamal Khan
Chairman
Member
Member
Salient Feature of the Objectives andResponsibilities of the Audit Committee of theBoard, number of Audit Committee meeting
held in 2011 and Report of the Audit Committee
of the Board are given on pages 48 to 49 of this
Annual Report.
Directors' Remuneration
The non-executive directors of the Board
representing shareholders do not take any
remuneration or reimbursement of any
expenses for attending Board meeting or Board
Committee meeting or for any other purpose.
The fees and expenses incurred for Independent
Director and Depositor Directors are shown in
Note 39 to the Financial Statements.
The remuneration paid to the Managing Director
is given in Note 38 to the Financial Statements.
Preparation of Financial Statements
Financial statements of DBBL give a true and
fair view of the state of affairs of the Bank and
the results of its operations and cash flows. All
the applicable Bangladesh Accounting
Standards and Bangladesh Financial Reporting
Standards adopted by ICAB are complied with
for preparation of financial statements. The
financial statements are prepared by the
management and approved by the Board of
Directors and audited by auditors appointed in
the Annual General Meeting.
Directors' Responsibility for InternalControl and Financial Reporting
Directors' statement on their responsibility for
internal control and financial reporting of the
Bank is given on page 248 of this Annual Report.
External audit
A. Qasem & Co., Chartered Accountants (A
Cooperating Firm of PricewaterhouseCoopers) is
the statutory auditors of the Bank. They don't
provide any other accounting, taxation or
advisory services to the Bank except certification
of cash incentives payable to exporters.
Compliance with Bangladesh Bankregulations
As a commercial bank, DBBL is regulated and
supervised by Bangladesh Bank under Bank
Company Act 1991 and rules and regulations
made there under. DBBL attaches highestpriority to strict compliance with all regulatory
requirements of Bangladesh Bank in terms of
core risk management, capital adequacy ratio,
foreign exchange regulations, liquidity
management, KYC and anti-money laundering
compliance etc.
Audit and Inspection by Bangladesh Bank
Bangladesh Bank also undertakes audit &
inspection of DBBL at regular intervals.
Compliance with observations and
recommendations made by Bangladesh Bank
help the Bank to improve internal control, risk
management, corporate governance and
regulatory compliance maximizing benefit for all
stakeholders.
Compliance with Corporate GovernanceGuidelines of Bangladesh Bank
DBBL has also adequately complied with
Corporate Governance Guideline of Bangladesh
Bank (BRPD Circular No. 06 dated February 04,
2010) in terms of overall business activities of
the Bank including credit and risk management,
internal control, human resource management
as well as income and expenses. Segregation of
financial, operational and administrative
authorities and responsibilities between Board
and Management have been also ensured.
Compliance with SEC regulations
As a listed company, DBBL is regulated by
Securities and Exchange Commission (SEC). We
have adequately complied with corporate
governance guidelines issued by the Securitiesand Exchange Commission.
Credit Rating of the Bank
In line with Bangladesh Bank's BRPD Circular No.
06 dated July OS, 2006 and in order to improve
the risk management and corporate governance
system of the Bank and to safeguard the interest
of investors, depositors, creditors, shareholders
and the Bank Management as a whole, Credit
rating of the Bank for the year 2010 was done by
Credit Rating Agency of Bangladesh (CRAB). The
date of rating by CRAB was 23 June 2011.
CRAB assigned 'AA2' (pronounced as double AA
two) rating in the Long Term and ST-1 rating in
the Short Term.
Credit rating will be done regularly on a yearly
basis and credit rating of 2011 will be completed
before June 30, 2012.
Relations and communication withshareholders
The Bank attaches highest importance on two
way communications with the shareholders. The
Bank believes that the shareholders should have
access to all relevant information about the Bank
to make informed judgment and decisions. All
the relevant information is placed in website
(www.dutchbanglabank.com) for convenience of
the shareholders. As per SEC guidelines all the
price-sensitive information having any possible
impact on share prices of the Bank are
communicated to the shareholders by
publication in national dailies and through
website of DSE, CSEand SEe. Quarterly financial
statements are communicated to all the
shareholders through DSE, CSE and SEe.
Half-yearly financial statements are directly
communicated to all the shareholders. Audited
yearly Financial Statements are published in the
national dailies. The half-yearly and yearly
results and press releases are also made
available in our website. The Annual General
Meeting provides very good opportunities for
communication with shareholders. All the
suggestions or recommendations made by the
shareholders in AGM or any time during the year
are taken very seriously for compliance and
better corporate governance of the Bank.
Status of compliance with the conditions imposed by the Securities and ExchangeCommission's Notification No. SEC/CMRRCD/ 2006-158/Admin/02-08 dated February 20,2006 issued under Section 2CCof the Securities and Exchange Ordinance, 1969
Compliance status Explanation for(Put./ in the non-Condition
Title appropriate column)No. compliance
Complied I Non- with the
Complied condition
1.00: Board of Directors
1.1 The number of the Board members of the ./Board's size company should not be less than 5 (five) and
more than 20 (twenty).
1.2 (i) At least one tenth (1/10) of the total number of ./Independent the Company's Board of Directors, subject to a
Directors minimum of one, should be independent directors.
(ii) The independent director(s) should be ./appointed by the elected directors.
1.3 The positions of the Chairman of the Board and ./Chairman & Chief Executive Officer of the Company should
CEO preferably be filled by different individuals. The
Chairman of the company should be elected
from among the directors of the company. The
Board of Directors should clearly define
respective roles and responsibilities of the
Chairman and the Chief Executive Officer.
1.4: The Directors' Report to Shareholders
(a) The financial statements prepared by the ./management of the issuer company presentfairly its state of affairs, the result of its
operations, cash flows and changes in equity.
(b) Proper books of account of the issuer ./company have been maintained.
(c) Appropriate accounting policies have been ./consistently applied in preparation of the financial
statements and that the accounting estimates are
based on reasonable and prudent judgment.
(d) International Accounting Standards, as ./applicable in Bangladesh, have been followed in
preparation of the financial statements and any
departure there from has been adequately
disclosed.
(e) The system of internal control is sound in ./design and has been effectively implemented
and monitored.
(f) There are no significant doubts upon the ./issuer company's ability to continue as a going
concern. If the issuer company is not considered
to be a going concern, the fact along with
reasons thereof should be disclosed.
(g) Significant deviations from last year in Not Applicableoperating results of the issuer company should
be highlighted and reasons thereof should be
explained.
(h) Key operating and financial data of at least ./preceding three years should be summarized.
(i) If the issuer company has not declared Not Applicabledividend (cash or stock) for the year, the reasons
thereof should be given.
(j) The number of Board meetings held during ./the year and attendance by each director should
be disclosed. (see at annexure-A)
(k) The pattern of shareholding should be ./reported to disclose the aggregate number of
shares (along with name wise details where
stated below) held by:-
(i) Parent/subsidiary/Associated companies and
other related parties (name wise details);
(ii) Directors, Chief Executive Officer, Company
Secretary, Chief Financial Officer, Head of
Internal Audit and their spouses and minor
children (name wise details);
(iii) Executives; and
(iv) Shareholders holding ten percent (10%) or
more voting interest in the company (name wise
details). (see at Annexure-B)
2.00: Chief Financial Officer (CFO), Head of Internal Audit and Company Secretary
2.1Appointment
2.2Required to
Attend Board
Meeting
The company should appoint a Chief Financial
Officer (CFO), a Head of Internal Audit and
Company Secretary. The Board of Directors
should clearly define respective roles,
responsibilities and duties of the CFO, the Head
of Internal Audit and the Company Secretary.
The CFO and the Company Secretary of the
companies should attend meetings of the Board
of Directors, provided that the CFO and/or the
Company Secretary should not attend such part
of a meeting of the Board of Directors which
involves consideration of an agenda item
relating to the CFO and/or the Company
Secretary.
./
3.00: Audit Committee
The company should have an Audit Committee .Ias a sub-committee of the Board of Directors.
The Audit Committee should assist the Board of
Directors in ensuring that the financial
statements reflect true and fair view of the state
of affairs of the company and in ensuring a good
monitoring system within the business.
The Audit Committee shall be responsible to the
Board of Directors. The duties of the Audit
Committee should be clearly set forth writing.
3.1: Constitution of Audit Committee
(i) The Audit Committee should be composed of .Iat least 3 (three) members.
(ii) The Board of Directors should appoint .Imembers of the Audit Committee who should
be directors of the company and should include
at least one independent director.
(iii) When the term of service of the Committee Not Applicable
members expires or there is any circumstance
causing any Committee member to be unable to
hold office until expiration of the term of service,
thus making the number of the Committee
members to be lower than the prescribed number
of 3 (three) persons, the Board of Directors should
appoint the new Committee member(s) to fill up
the vacancy (ies) immediately or not latter than 1
(one) month from the date of vacancy (ies) in the
Committee to ensure continuity of the
performance of work of the Audit Committee.
3.2: Chairman of Audit Committee
(i) The Board of Directors should select 1 (one) .Imember of the Audit Committee to be Chairman
of the Audit Committee.
(ii) The Chairman of the Audit Committee should .Ihave a professional qualification or knowledge,
understanding and experience in accounting or
finance.
3.3: Reporting of the Audit Committee3.3.1: Reporting to the Board of Directors
(i) The Audit Committee should report on its .Iactivities to the Board of Directors.
(ii) The Audit Committee should immediately
report to the Board of Directors on the following
findings, if any:-
(a) Report on conflicts of interests; Not Applicable
(b) Suspected or presumed fraud or irregularity or Not Applicable
material defect in the internal control system;
(c) Suspected infringement of laws, including Not Applicablesecurities related laws, rules and regulations; and
(d) Any other matter which should be disclosed to
the Board of Directors immediately. Not Applicable
3.3.2 If the Audit Committee has reported to the Board of
Reporting to Directors about anything which has material impact Not Applicable
the Authorities on the financial condition and results of operation
and has discussed with the Board of Directors and
the management that any rectification is necessary
and if the Audit Committee finds that such
rectification has been unreasonably ignored, the
Audit Committee should report such finding to the
Commission, upon reporting of such matters to the
Board of Directors for three times or completion of
a period of 9 (nine) months from the date of first
reporting to the Board of Directors, whichever is
earlier.
3.4: Reporting to the Shareholders and General Investors
Report on activities carried out by the Audit .ICommittee, including any report made to the Board
of Directors under condition 3.3.1 (ii) above during
the year, should be signed by the Chairman of the
Audit Committee and disclosed in the annual report
of the issuer company.
4.00: External/Statutory AuditorsThe issuer Company should not engage its external/statutory Auditors to perform the following services of the Company
namely:
(i) Appraisal or valuation services or fairness .Iopinions;
(ii) Financial information systems design and .Iimplementation;
(iii) Book-keeping or other services related to the .Iaccounting records or financial statements;
(iv) Broker-dealer services; .I(v) Actuarial services; .I(vi) Internal Audit services; and .I(vii) Any other service that the Audit Committee Not Applicabledetermines.
Annexure-A09 (nine) meetings of the Board of Directors were held in the year 2011. Attendance of the Directorsis given below:
51. No. Name of Directors Number of Board RemarksMeeting attended
01. Mr. Zahid Hossain Khan 08 Pre-occupied and leave ofabsence was granted by theBoard
02. Mr. Sayem Ahmed 09 -
03. Mrs. Frey-Tang Yuen Mei, Barbara - Pre-occupied and leave ofabsence was granted by theBoard
04. Mr. Md. Fakhrullslam 08 Pre-occupied and leave ofabsence was granted by theBoard
05. Dr. Irshad Kamal Khan 06 Pre-occupied and leave ofabsence was granted by theBoard
06. Dr. Syed Fakhrul Ameen 06 Pre-occupied and leave ofabsence was granted by theBoard
07. Mr. Chowdhury M. Ashraf Hossain 08 Pre-occupied and leave ofabsence was granted by theBoard
08. Mr. Abedur Rashid Khan 01 01 (one) meeting was heldduring his period
09. Mr. K. Shamshi Tabrez 09 -
(Managing Director)
Annexure-BThe pattern of Shareholding of Dutch-Bangia Bank Limited as of 31 December 2011 as per SEe'sNotification No.SEC/CMRRCD/2006-158/Admin/02-08 dated 20 February 2006:
(i) Shareholding by Parent/Subsidiary/Associated Companies and other related parties: Nil
(ii) Share holding by :Directors Given in the notes to the financial statements (Note 16.5)Chief Executive Officer NilCompany Secretary NilChief Financial Officer NilHead of Internal Audit NilSpouse of above Executives Nil
(iii) Shareholding by Executives Nil(iv) Shareholders holding ten percent (10%) or more shares:
51. No. Name of the shareholders No. of shares as of 31 December 201101 Mr. Mohammed Sahabuddin Ahmed 44,424,650 shares = 22.21%02 Mr. Md. Abdus Salam * 33,333,330 shares = 16.67%03 M/s. Ecotrim Hong Kong Limited 49,471,880 shares = 24.74%
• Sub-judice
• To complete all documentation formalities in
the loan accounts and foreign trade, if any.
• To improve the deposit mix with a view to
bring down the cost of fund.
• To give emphasis on account opening, retail
and SME business.
• To take necessary actions for proper and
prompt delivery of ATM cards and cheque
books.
• Not to provide EOL without the approval of
the competent authority of the Bank.
• To complete Balancing / Breakup of GL
Heads.
• To check the daily activity reports of the
branches regularly.
• To complete the audit of the new branches
within 06 (six) months from the date of the
opening with a view to comply with the
irregularities at the early stage.
• To comply the Anti Money Laundering rules
and regularize the KYCprofiles.
• To define roles and responsibilities of all
officers of the Branch by making organogram
of the Branch.
• To prepare manpower planning of the
branches.
• To take necessary steps for removing the
anomalies between daily listing and
statement of affairs at the earliest.
• To maintain Departmental Control Function
Check List (DCFCL).
• To maintain fire proof safe custody for
ensuring security of documents.
• To complete affixing of stickers on the body
of the fixed assets of the Branches.
• To open accounts with proper documents
and complying all the rules and regulations
in force.
• To keep the maintenance cost register
against ATMs and list of ATM booths which
are not under AMC.
• To solve mismatches between physical cash
position of the ATM and the figure of cash at
ATM GL as per statement of affairs.
• To secure the vault room of the Branch.
• To obtain the network diagram and electric
diagram of the Branches.
• To strengthen the internal control system.
• To implement the Core Risk Management
Guidelines.
• To ensure necessary training arrangements
to the AROs for effective service.
• To regularize various lapses, irregularities in
general banking, foreign trade and credit in
the branches.
The Committee also reviewed the audited
financial statements as of 31 December 2010,
half-yearly financial statements as of 30 June,
2011 and quarterly financial statements as of 30
September 2011 of the Bank.
While reviewing financial statements, the
Committee thoroughly reviewed adequacy of
provisions made against loans and advances
and other assets and capital adequacy ratio.
The Committee stressed the need for close
co-ordination between external Auditors and
Internal Control and Compliance Division for
continuous improvement of internal control
procedure and risk management system of the
Bank.
~Sayem AhmedChairmanAudit Committee of the Board