The Bangladesh Bank’s proposed amendments to the Bank Companies Act, aimed at limiting shareholding by individuals, families, and institutions across multiple banks, have faced strong opposition from bank owners and industry representatives. The central bank argues that the changes are essential to prevent conflicts of interest and curb excessive influence over banking decisions, pointing to recent cases of mismanagement and financial irregularities.
Under the draft amendment, no individual, family member, or institution would be allowed to hold more than 5% of shares in multiple banks at the same time, whether directly or indirectly. Voting rights would also be capped at 5%, except for the government, non-profit entities, or strategic institutional investors.
A consultation meeting was held last Wednesday by the Financial Institutions Division (FID) of the Ministry of Finance, chaired by Secretary Nazma Mobarak, to discuss the proposals. The draft suggests adding three new subsections to Section 14(k) of the Bank Companies Act 2025, with the primary objective of preventing any single party from controlling multiple banks simultaneously.
Key Provisions of the Draft Amendment
- Restriction on Large Holdings Across Banks: Individuals, families, or institutions cannot hold substantial stakes in more than one bank at a time.
- Aggregate Limit Across Banks: If an entity holds 2% or more in one bank, it may not hold 2% or more in another, applied both individually and jointly.
- Voting Rights Cap: Voting rights are restricted to 5% even if shareholding exceeds this threshold, with exceptions for the government, non-profits, and strategic institutional investors.
Currently, the Bank Companies Act places no restrictions on cross-holdings, allowing shareholders to hold up to 10% of a bank’s shares with full voting rights under the “one share, one vote” principle.
Stakeholder Responses
The Bangladesh Association of Banks (BAB) strongly opposed the proposed caps. BAB representatives argued that ordinary shareholders cannot influence bank policies directly, as decision-making authority rests primarily with boards of directors. Since limits on family representation on boards are already proposed, BAB maintains that additional shareholding restrictions are unnecessary. They also suggested defining “family” narrowly—only spouses and dependents—and raising the total family holding limit to 25%, cautioning that broader definitions could unfairly restrict legitimate entrepreneurial families.
Conversely, Bangladesh Bank officials cited instances where a large industrial group controlled majority shares in six banks, exerting undue influence over policies and misappropriating funds. Compensation for depositors of five merged private banks last year cost the government BDT 20,000 crore, highlighting the need for stricter safeguards.
Secretary Nazma Mobarak stated that the draft amendment requires further discussion, noting ongoing disagreements between the central bank and BAB over shareholding limits. She urged both sides to reach a consensus in the next meeting.
Proposed Shareholding Limits: Summary
| Feature | Proposed / Current Practice |
|---|---|
| Maximum shares in multiple banks | 5% per individual/family/institution (proposed) |
| Aggregate family holding limit | 25% (BAB proposal) |
| Voting rights cap | 5% maximum, except government/non-profit/strategic investors |
| Current maximum per bank | 10% per shareholder (existing law) |
| Board influence | Ordinary shareholders: limited; Board of Directors: primary authority |
| Justification | Prevent undue influence, reduce conflicts, protect depositors |
| Notable incidents | Industrial group controlled 6 banks; BDT 20,000 crore paid to depositors |
The ongoing debate underscores the tension between regulatory objectives aimed at strengthening the banking sector and bank owners’ concerns about over-regulation. The final amendment will need to balance financial stability with operational flexibility for shareholders and entrepreneurial families.