The Bangladesh Bank’s proposed amendments to the Bank Companies Act, which seek to limit shareholding by individuals, families, and institutions across multiple banks, have encountered strong resistance from bank owners and industry representatives. The central bank argues the changes are necessary to prevent conflicts of interest and curb excessive influence over banking decisions, citing recent incidents of mismanagement and financial misconduct.
Under the draft law, no individual, family member, or institution would be permitted to hold more than 5% of shares in multiple banks simultaneously, whether directly or indirectly. The amendment also proposes capping voting rights at 5%, except for the government, non-profit entities, or strategic institutional investors.
A consultation session was convened last Wednesday by the Financial Institutions Division (FID) of the Ministry of Finance, chaired by Secretary Nazma Mobarak, to review the proposals. The draft suggests adding three new subsections to Section 14(k) of the Bank Companies Act 2025, primarily to prevent any single party from controlling multiple banks.
Key Provisions of the Draft Amendment
- Restriction on Large Holdings Across Banks: Individuals, families, or institutions may not hold significant stakes in more than one bank at a time.
- Aggregate Limit Across Banks: Holding 2% or more in one bank bars an entity from holding 2% or more in another, applied both individually and jointly.
- Voting Rights Cap: Voting rights are limited to 5% even if shareholding exceeds this threshold, with exceptions for the government, non-profits, and strategic institutional investors.
Currently, the Bank Companies Act imposes no cross-holding limits. Shareholders may hold up to 10% of a bank’s shares, exercising full voting rights on a “one share, one vote” basis.
Stakeholder Reactions
Representatives of the Bangladesh Association of Banks (BAB) strongly opposed the draft. They argued that ordinary shareholders lack direct influence over policy, which is primarily exercised by bank boards. Since limits on family representation on boards are already proposed, BAB contends that additional shareholding restrictions are unnecessary. They also suggested defining “family” narrowly as spouses and dependents and increasing the total family shareholding limit to 25%, warning that broader definitions could unfairly constrain legitimate entrepreneurial families.
In contrast, Bangladesh Bank officials pointed to cases where a large industrial group controlled majority shares in six banks, enabling undue influence over policy decisions and misappropriation of funds. Last year, compensating depositors of five merged private banks cost the government BDT 20,000 crore, underscoring the need for stricter safeguards.
Secretary Nazma Mobarak noted that the draft requires further discussion, as disagreements persist between the central bank and BAB over shareholding limits. She urged both sides to reach a consensus at the next meeting.
Proposed Shareholding Limits: Overview
| 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 govt/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 debate highlights the ongoing tension between regulatory attempts to safeguard the banking sector and concerns from owners about over-regulation. The final amendment will need to balance financial stability with operational flexibility for shareholders and entrepreneurial families.