Bangladesh Bank retirees’ path to MD roles raises ‘conflict of interest’ concerns

Experts fear the new rule could motivate officers to pursue future benefits “unethically”

Officers with 20 years of experience in Bangladesh Bank and other financial regulators can now become managing directors or chief executives at any commercial bank.

The condition is that they must have served in a first-class or equivalent post and held second-grade responsibilities at some point in their career.

Bangladesh Bank issued a circular on Nov 27 creating this opportunity. But Prof Shahidul Islam Zahid, chairman of the banking and insurance department at Dhaka University, sees a conflict of interest between regulatory bodies and the institutions they oversee.

Under the central bank’s new decision, officers from Bangladesh Bank, the Bangladesh Securities and Exchange Commission (BSEC), and the Insurance Development and Regulatory Authority (IDRA) now have a legal path to join commercial banks.

While there had been no formal policy on this matter until now, retired central bank officials have previously joined commercial banks.

Many moved directly into deputy managing director or managing director positions immediately after retirement.

Some even headed commercial banks’ training academies, drawing criticism within the central bank and the broader banking sector. Bangladesh Bank has now formally opened that path.

The criteria for MD appointments have also changed.

Candidates must now have at least 20 years of experience in banking, including three years as a deputy or additional managing director.

Earlier, the requirement, issued in February 2024, was two years in those positions.

The new circular retains other conditions but extends this experience requirement by one year.

Officers must also have served in a first-class or equivalent post in a financial regulatory body and held second-grade responsibilities under the national pay scale.

Currently, assistant director is the entry-level first-class post in Bangladesh Bank, BSEC, and IDRA, while the highest promotion is executive director (ED), a second-grade position.

Only three EDs currently hold first-grade pay scale posts -- two by seniority and one for research leadership.

Under the new rules, only EDs can move to MD roles in commercial banks. Officers reaching ED by retirement or voluntarily resigning after 20 years of service now have this opportunity.

A senior central bank official, speaking on condition of anonymity, told bdnews24.com: “An ED can immediately apply for an MD post at any bank and, if selected, resign and join the commercial bank.”

MD salaries in private banks range from Tk 1 million to 1.8 million, creating potential incentives.

Prof Zahid said, “This is a complete conflict of interest. Moving from a regulatory body to a supervised institution is never acceptable.”

Bangladesh Bank spokesperson Arief Hossain Khan defended the decision, saying it addresses staff shortages at top levels and utilises experienced personnel.

“Banks need skilled and professional leaders. This allows officers with long regulatory experience to contribute their expertise. Banks can hire them following proper procedures,” he said.

Prof Zahid countered this, noting that regulatory and commercial banking work differ. “Experience in one doesn’t fully apply to the other. Regulators enforce rules and have no commercial competition, while banks operate in a competitive environment with financial risks.

“Officers may be drawn to banks for higher rewards without taking the risk initially. This could push them toward unethical actions for future benefits. I’m not saying all will do so, but the opportunity is now there.”