Written by The Banking Post
A proposal to cap significant shareholding in bank companies by individuals, families and entities has triggered strong resistance from banking industry stakeholders, exposing sharp differences with the central bank over how to curb undue influence in the sector.
The central bank has suggested amending the Bank Company Act, 1991 to bar any individual, family or entity—directly or indirectly—from holding a significant stake in more than one bank at a time. The move is intended to reduce the grip of vested interests on banks, drawing on what officials described as bitter lessons from past failures.
The proposal was discussed on Wednesday at a meeting of the Financial Institutions Division (FID) under the finance ministry, chaired by its secretary. During the discussion, representatives of the Association of Bankers, Bangladesh (ABB) strongly opposed the idea, arguing that shareholding alone does not determine control over bank policy.
According to ABB representatives, policy decisions are shaped by boards of directors, not general shareholders. They also argued that since the draft amendment already proposes limiting the number of directors from a single family, imposing additional caps on share ownership is unnecessary and illogical.
Central bank officials countered that concentrated ownership had previously allowed certain business groups to dominate multiple banks, influence decisions and siphon off large sums, ultimately harming depositors and financial stability. They cited cases where excessive control over several banks led to massive losses, forcing the government to inject about Tk 200 billion of public funds to protect depositors after five private banks were merged late last year.
The FID secretary said the amendment is yet to be finalised, acknowledging disagreements between the central bank and the bankers’ association over the proposed cap. She said both sides have been asked to work towards a consensus before the next meeting.
Bankers, however, cautioned against what they described as a reactionary approach. The ABB chairman said past problems in the sector stemmed from regulatory lapses, directed lending and state-level decisions, rather than shareholding structures alone.
He argued that while restricting individuals from serving as directors in multiple banks could be justified, barring them from holding significant stakes in more than one lender could discourage investment and weaken the capital market. He added that reputable entrepreneurs with clean records should not be penalised, stressing that good governance and the right to do business should go hand in hand.
The debate highlights the challenge policymakers face in balancing tighter oversight with investor confidence as Bangladesh seeks to reform its banking laws in the aftermath of recent sector turmoil.
