Corporate governance practice in Commercial Banks of Bangladesh A Study on Southeast Bank Ltd

Premier University
INTERNSHIP REPORT
ON
Corporate governance practice in Commercial Banks of Bangladesh
A Study on Southeast Bank Ltd
PREPARED FOR
Mr.Rajib Datta
Assistant Professor
Department Of Finance
Faculty of Business Administration
Premier University
Chittagong
PREPARED BY
Md Shazzad Hossain
ID. No: 150-22080-2147
Section: A
Major: Finance
Batch: 22nd
MBA Program
Premier University
Date of Submission: 11/05/2017

Premier University
INTERNSHIP REPORT
ON
Corporate governance practices In Commercial Banks of Bangladesh
A Study on Southeast Bank Limited
Agrabad Branch, Chittagong.

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11 May , 2017
Mr.Rajib Datta
Assistant Professor,
Department of Finance
Premier University, Chittagong, Bangladesh.
Sub: Submission of Internship Report.
Dear Sir,
It is my great pleasure to submit the report on ““Corporate Governance Practices in
Bangladesh , a study on Southeast Bank Limited” as a part of my Internship program.
I have closely observed different operations of Southeast Bank Ltd in my internship
period.
I enjoyed preparing this report, which enriched my practical knowledge of the
theoretical concept. I tried to reflect the practical operational aspects of the Bank,
which is complementary to the theoretical lessons. I am very much glad that you
have given me the opportunity to prepare this report for you & hope that this report
will meet the standards of your judgment.
Sincerely yours,
……………………………………..
Md Shazzad Hossain
ID. No: 150-22080-2147
Section: A
Major: Finance
Batch: 22nd
Premier University.Chittagong

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Declaration
I, Md. Shazzad Hossain , hereby declare that this report has been prepared by me
under the Supervision of Mr.Rajib Datta, Assistant Professor, Department of
Finance as a requirement for the accomplishment of MBA degree from the
Department of Finance, Faculty of Business Administration, Premier University,
Chittagong. It is also declared that, this report has been prepared for academic
purpose only and has not been submitted elsewhere for any other purposes.
Sincerely yours,
……………………………………..
Md Shazzad Hossain
ID. No: 150-22080-2147
Section: A
Major: Finance
Batch: 22nd
Premier University.Chittagong
LETTER OF ACCEPTANCE

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This is to certify that Md. Shazzad Hossain ID. No: 150-22-080-2147, Major in Finance is a
regular student of Masters of Business Administration under the department of Finance,
Premier University. He has successfully completed his internship at Southeast Bank Ltd,
Oxygen More Branch Chittagong and he has prepared his internship report under my
supervision. His assigned Internship topic is “Corporate Governance Practices in
Bangladesh , a study on Southeast Bank Limited”
He is permitted to submit the internship report for presentation.
I wish him every success in life and expect a great future.
………………………………………….
r.Rajib Datta
Assistant Professor
Department Of Finance
Faculty of Business Administration
Premier University
Chittagong

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Acknowledgement
At first I would like to express my gratitude to almighty Allah who has
given me the opportunity to go through the total process of internship
and to write a report on this regard.
I would like to acknowledge my deepest gratitude to my honorable
Internship supervisor, Mr.Rajib Datta ,Assistant Professor, Department
of Finance Premier University, Chittagong, who has given me important
suggestionand excellent guidelines for preparing this internship report.
I would also like to thank Ms. Joynab and Mr Md.Nssiruddin
honourable coordinator of my internship program at Southeast Bank
who has provided training facilities which made me understand the basic
characteristics of banking.
I am very much grateful to the Head of Branch Mr. Mir Ahmed Bin
Islam of South East Bank Bangladesh Limited, Oxygen Branch for his
cooperation and valuable suggestion. I would also like to thank all the
personnel of South East Bank Bangladesh Limited, Oxygen Branch, who
has extended their whole-hearted co-operation for preparing the report,
especiallyMr.Juwel.
Finally, I would like to convey my gratitude to all my teachers, friends
and my family members who extend their supportto prepare this report.

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Executive Summary
As a part of Internship program for MBA, each of the students needs an
organizational attachment. Being attached with Southeast Bank Limited, this study
has been undertaken to fulfil the internship purpose. During a specified period of
internship, the students are required to prepare a report on the organization from
where he has completed his internship.
Southeast Bank Limited is a private commercial bank, which is operating its business
last 21 years. The bank has achieved a tremendous success during this short span
of time and established itself as a progressive and dynamic financial institution in the
country. The bank is widely acclaimed by the business community, starting from
small businessmen/entrepreneurs to the big traders/industrial group, including the
top rated corporate clients who hold pragmatic outlook and financial solution. Mainly
secondary data have been used to gather information which is necessary to prepare
this study.
Corporate Governance is based on several critical principles. They include an
independent, active and engaged Board of Directors which has the skill to properly
evaluate and oversee the business process, business and financial performance,
internal control and compliance structure and direct management on strategic and
policy issues. On the other hand, the Board has to ensure that the management
headed by Chief Executive Officer (CEO) fully discharge their day to day
administrative responsibilities prescribed by BB and the Board itself and necessarily
refrain themselves from micro management of the management affairs.SEBL,
recognizes the importance of good corporate governance as a major factor in
enhancing the efficiency of the organization. The Bank therefore seeks to encourage
the conduct of its business to be in line with the principles of good corporate
governance, which form a basis for sustainable growth.

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Table of Content
Chapter Parts Tittles pages
1
INTRODUCTORY ASPECT
1.1 Introduction 1-2
1.2 Preface 3
1.3 Objectives of the Study: 3
1.4 Methodology 4
1.5 Scope 4
1.6 Limitations 4
1.7 Literature Review 5-6
2 ONE
Theoretical Aspect and Corporate
Governance Practice in Bangladesh
7
21.1 Define Corporate Governance
8
2.1.2 Principle of Corporate Governance 8-13
2.1.3 Asian Round Table on Corporate Governance
(ARCG)
14
2.1.4 Benefit of Good Corporate Governance 15-16
TWO
2.2.1 Introduction 17
2.2.2.1 History of Corporate governance in Bangladesh 17-18
2.2.2.2 Current scenario of Corporate governance in
Bangladesh
18
2.2.3 Guideline of Corporate Governance by Securities
and Exchange Commission of Bangladesh
(SECB)
19-21
2.2.4 Guidelines for Corporate governance of
Bangladesh Bank
21-24
2.2.5 Challenges of corporate governance in Bangladesh 25-26
ORGANIZATIONAL PARSPECTIVE 27
3 0NE
3.1.1 COMPANY OVERVIEW
28
3.1.2 VISION 29
3.1.3 MISSION 29

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3.1.4 STRATEGIES
29-31
3.1.5 Major functions of the Bank 31-32
3.1.6 FUNCTIONAL DEPARTMENTS 32-35
TWO 3.2.1 Introduction 36
3.2.2 Conceptual Framework 36
3.2.3 Ownership Composition 36-38
3.2.4 Board of Directors 39
3.2.5 Different aspect of Board of directors 40-41
3.2.6 Role and Responsibilities of the Board of
Directors
41-44
3.2.7 Board’s Committees and their Responsibilities 44-52
3.2.8 Management Committees and their responsibilities 52-59
3.2.9 External Auditors 59
3.2.10 Reports On corporate governance of SBL
3.2.9.1 Report on Internal Control
3.2.9.2 Report on Risk Management
3.2.9.3 Report on Internal Audit
3.2.9.4 Report on Communication with
Shareholders
3.2.9.6 Report on compliance with the Security
and Exchange commission
3.2.9.5 Report on compliance with Bangladesh
Bank Guidelines
60
60
61
61-62
62-63
63-68
68-74
CONCLUTION ASPECT
4
4.1 SOWT 75
4.2 Findings 76
4.3 Recommendation 77-78
4.4 Conclusion 79
4.5 References 8O

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Practices of corporate governance In
Commercial Banks of Bangladesh
A study on South East Bank
Limited

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Banking sector in Bangladesh has been featured by myriad decreasing profitability,
increasing non-performing loans, increased loan loss provisions, eroded credit
discipline, low recovery rate, inferior asset quality, poor governance, excessive
interference from the government of the day and the bank-owners, weak regulatory
and supervisory role etc. (Hassan, 1994; USAID, 1995; Haque et al., 2007). Internal
control system along with accounting and audit qualities are believed to have been
substandard (World Bank, 1998; CPD, 2001). The reports by the Banking Reform
Commission (BRC) (1999) and Bangladesh Enterprise Institution (BEI) (2003) raised
serious concerns on the banking sector and criticized the quality of governance.
Banking sector in Bangladesh is constituted by 57 banks and almost all of
them are commercial banks. The four largest banks are owned by the state and rest
are owned by the private investors. Of them, 27 banks are listed with the Dhaka
Stock Exchange (DSE) as of December 2009. In addition to directives of the
Bangladesh Bank, Bangladesh Enterprise Institute (BEI) has published “The Code of
Corporate Governance for Bangladesh” in 2004. Securities and Exchange
Commission (SEC) issued guidelines in the form notification in 2006 for the listed
firms in order to enhance corporate governance in the interest of investors and the
capital market. These guidelines prescribed dealt with the matters relating to (i)
board size, number of independent directors, appointment of Chairman and CEO
and Directors' Report to shareholders; (ii) Appointment of CEO, Head of Internal
Audit, and Company Secretary, attendance of Board Meeting by CEO and Company
Secretary; (iii) Audit Committee and its reporting to Board of Directors/ Commission
and to the shareholders; and (iv) engagement of external auditors etc. All listed
companies (including listed banking companies) in Bangladesh are required to follow
these prescribed guidelines. They have to provide reporting the status of compliance
on corporate governance in Director's Report.
Other regulatory measures include: proper test for appointment of directors,
disqualification of directors on the ground of conviction, appointment of qualified and
1.1 Introduction

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experience directors, capping of the number of directors to 13, non-eligibility of close
relatives of the directors for the position in bank board, limitation of the director’s
loans to 50% of paid up value of the shares held by the directors, criminalising
insider trading and constitution of audit committee of board of directors .These
regulatory response may lead, it is expected, to better disclosure of financial
information, uplifting standard of banking activities. Recently, the financial markets of
developing economies like Bangladesh have experienced rapid changes due to the
growth of wider range of financial products. As a result of this, banks have been
involved with high risk activities such as trading in financial markets and different off-
balance sheet activities more than ever before (Greuning and Bratanovic, 2003),
which necessitates an added emphasis on good governance of banks in Bangladesh
(Haque et al., 2007). Given that Bangladeshi banking sector is relatively less efficient
and less experienced for asset and liability management, good governance is even
more required to establish a sound banking system.
The Bangladeshi banking sector is dominated and controlled by founder
family members who are also dominant player in corporate sector, foreign owners
and the government. Farooque et al (2007) reports that five largest shareholders
hold more than 50% of ordinary shares, most of the CEOs and the directors are from
controlling families. Company board has less independence due to dominance of
family-appointed directors who set the addendum of the board meeting to implement
their own agenda. The management and the board are intertwined which reduces
the opportunity to prevent insider trading ; the independent or non-executive
directors who have social or family connection with controlling shareholder group
fails to provide independent judgment and minority shareholders’ rights are largely
ignored or supressed (Farooque et al 2007). The existence of conflict between family
member dominated board members and minority shareholders has been a regular
feature in Bangladesh like other developing countries (Oman et al , 2003).
Given the existence of family members dominated board and the dominance
of majority shareholders over minority shareholders, the implementation good
governance practices in Bangladeshi banking sector may experience serious
setbacks which may not yield expected results. My study would like to examine the
justification of such apprehension.

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This report has been prepared as a practical requirement of MBA Program after
completing the academic courses a student has to complete Specified duration of
organizational attachment. So, after completion of 3-month organizational
attachment at Southeast Bank Limited (Oxygen Moor Branch), this report has been
prepared.
This report on “Corporate Governance Practices in Bangladesh , a study on
Southeast Bank Limited” was initiated as a part of Internship Program, which is a
MBA degree requirement of the Business School of Premier University, Chittagong.
This report is being submitted To Mr.Rajib Datta Assistant Professor, Department of
Finance Premier University, Chittagong.
Since the MBA Program is an integrated, practical, theoretical method of learning,
the student of this program are required to have practical exposure in any kind of
business organization.
Main Objective: To Know the corporate Governance Practice of The
Southeast Bank Ltd.
Supporting Objective:
 To know the guidelines of different organization about corporate
governance.
 Briefly observe corporate governance practice of commercial
banks of Bangladesh and look at Southeast Bank Limited as an Organization at
some length.
 To know about the management style and organizational structure
of Southeast Bank Limited.
 To identify the problems and weakness of the banking systems of
Southeast Bank Limited.
 To know the product and services of Southeast Bank Limited.
 To Find Some suggestion.
1.2 Preface
1.3 Objectives of the Study:

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Different data and information are required to meet the goal of this report. Those
data and information were collected from various sources. Such as primary and
secondary which is showed bellow:
Primary sources:
 Personal observation.
 Face to face conversation of officers & clients.
 In-depth study of selected cases.
 Interviewing officers & clients.
 Relevant file study provided by the officers concerned.
 Working at different desks of the bank.
 Daily note taken during the internship period.
Secondary sources:
 File study.
 Annual reports
 SEBL website.
 Bangladesh Bank website
The scope of the study includes corporate governance practice in Bangladesh and
also the study on Southeast Bank ltd’s functions and practice of corporate
governance. The study limited in my observation and knowledge.
 I had no previous experience to direct a survey program that’s why this
report might not bring the same result what the authority expect.
 There was a limited scope for me to deal with the banking activities
directly.
 Within the short period of time, it is not possible for me to study ever
thing about the Southeast Bank Limited.
 I face some difficulties to collect sufficient information as corporate
governance is a issue of whole corporation.
1.4 Methodology
1.5 Scope
1.6 Limitations

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OECD Principles describe corporate governance in terms of relationship between
management of company, its shareholders, its board and other stakeholders. It is a
system which is used for the purpose of controlling and directing the companies.
We can bring some other meanings of corporate governance. For example, one
school of thoughts describes corporate governance as a “system” by which
companies are directed and controlled (Cadbury and Greenbury Report, 1992). But it
must be kept in our mind that the fundamental concern of corporate governance is to
ensure the conditions whereby a firm’s directors and mangers are held accountable,
ensure better and effective protection to all stakeholders. The World Bank argues
that the framework of corporate governance should be based on four pillars such as
Responsibility, Accountability, Fairness and Transparency (RAFT). According to
Kocourek, P. F, (2003), to counter the accounting, leadership, and governance
scandals, organizations are rushing to institutionalize corporate governance, which
may be even be counterproductive. The drive to more tightly regulate the
membership and functions of corporate boards is already encouraging companies to
view governance as a legal challenge rather than a way to improve performance.
There is no universally accepted code that ensures good corporate governance. But
there are some variables on which the corporate governance framework established.
Those are Responsibility, Accountability, Fairness and Transparency.
In the area of corporate governance practices of banks, three strands of literature
are found.
First strand focuses on how the corporate governance practices in banks differ from
those in non-banking firms (for example, Prowse 1997; Furfine 2001; Morgan
2002;Macey and O’Hara 2003). Furfine (2001) suggested that banks have two
related characteristics that inspire a separate analysis of the corporate governance
of banks. First, banks are generally more opaque than nonfinancial firms. Although
information asymmetries plague all sectors, evidence suggests that these
informational asymmetries are larger with banks (Furfine, 2001). From the
perspective of banking, loan quality is not readily observable and can be hidden for
long periods. In addition, banks can alter the risk composition of their assets more
quickly than most non-financial industries, and banks can readily hide problems by
1.7 LiteratureReview

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extending loans to clients that cannot service previous debt obligations. Therefore,
Morgan (2002) found that bond analysts disagree more over the bonds issued by
banks than by nonfinancial firms. The comparatively severe difficulties in acquiring
information about bank behavior and monitoring ongoing bank activities hinder
traditional corporate governance mechanisms (Levine 2004).
The second strand of literature looks at how better governance practices in banks
can help their financial development and growth (For example, Levine 1997;
Bushman and Smith 2003). Bushman and Smith discussed economics-based
research focused primarily on the governance role of financial accounting
information and propose future research ideas. As presented in their study, a
framework that isolates three channels through which financial accounting
information can affect the investments, productivity, and value-added of firms. The
first channel involves the use of financial accounting information by managers and
investors in identifying promising investment opportunities. The second channel is
the use of financial accounting information in corporate control mechanisms that
discipline managers to direct resources toward projects identified as good and away
from projects identified as bad. The third channel is the use of financial accounting
information to reduce information asymmetries among investors.
The third strand looks at corporate governance practices in banks from the
perspective of its impact on performance and efficiency of the banks themselves (For
example, Jensen and Meckling 1976; Williamson 1985; Hovey et al. 2003). This
strand has roots in the agency theory and underpins our study.

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Chapter 2
Theoretical Aspect and
Corporate Governance
Practice in Bangladesh

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 Part-1
Corporate governance is the system of rules, practices and processes by which a
company is directed and controlled. Corporate governance essentially involves
balancing the interests of a company's many stakeholders, such as shareholders,
management, customers, suppliers, financiers, government and the community.
Since corporate governance also provides the framework for attaining a company's
objectives, it encompasses practically every sphere of management, from action
plans and internal controls to performance measurement and corporate disclosure.
The following is a series of corporate governance principles of companies, their
board of directors and their shareholders. These principles are intended to provide a
basic framework for sound, long-term-oriented governance. But given the differences
among many public companies – including their size, their products and services,
their history and their leadership – not every principle (or every part of every
principle) will work for every company, and not every principle will be applied in the
same fashion by all companies.
I. Board of Directors
Composition
Directors’ loyalty should be to the shareholders and the company. A board
must not be beholden to the CEO or management. A significant majority of the board
should be independent.
All directors must have high integrity and the appropriate competence to
represent the interests of all shareholders in achieving the long-term success of their
company. Ideally, in order to facilitate engaged and informed oversight of the
2.1.1 Define CorporateGovernance
2.1.2 Principle of Corporate Governance

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company and the performance of its management, a subset of directors will have
professional experiences directly related to the company’s business. At the same
time, however, it is important to recognize that some of the best ideas, insights and
contributions can come from directors whose professional experiences are not
directly related to the company’s business but also to the Stakeholders.
Election of directors
Directors should be elected by a majority of the votes cast “for” and
“against/withhold” (i.e., abstentions and non-votes should not be counted for this
purpose).
Nominating directors
Long-term shareholders should recommend potential directors if they know
the individuals well and believe they would be additive to the board. A company is
more likely to attract and retain strong directors if the board focuses on big-picture
issues and can delegate other matters to management (see below at II.b., “Board of
Directors’ Responsibilities/Critical activities of the board; setting the agenda”).
Director compensation and stock ownership
A company’s independent directors should be fairly and equally compensated
for board service, although (i) lead independent directors and committee chairs may
receive additional compensation and (ii) committee service fees may vary. If
directors receive any additional compensation from the company that is not related
to their service as a board member, such activity should be disclosed and explained.
Companies should consider paying a substantial portion (e.g., for some
companies, as much as 50% or more) of director compensation in stock,
performance stock units or similar equity-like instruments. Companies also should
consider requiring directors to retain a significant portion of their equity
compensation for the duration of their tenure to further directors’ economic alignment
with the long-term performance of the company.
Board committee structure and service
their new directors, including background on the industry and the competitive
landscape in which the company operates, the company’s business, its operations,
and important legal and regulatory issues, etc.
-developed committee structure with clearly
understood responsibilities. Disclosures to shareholders should describe the
structure and function of each board committee.

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committee chairs and the lead independent director), balancing the benefits of
rotation against the benefits of continuity, experience and expertise.
Director tenure and retirement age
knowledgeable board members.
retirement age for directors; others have such rules but permit exceptions; and still
others have no such rules at all. Whatever the case, companies should clearly
articulate their approach on term limits and retirement age. And insofar as a board
permits exceptions, the board should explain (ordinarily in the company’s proxy
statement) why a particular exception was warranted in the context of the board’s
assessment of its performance and composition.
board’s skill set and perspectives remain sufficiently current and broad in dealing
with fast-changing business dynamics. But the importance of fresh thinking and new
perspectives should be tempered with the understanding that age and experience
often bring wisdom, judgment and knowledge.
Director effectiveness
basis, led by the non-executive chair, lead independent director or appropriate
committee chair. The board should have the fortitude to replace ineffective directors.
II. Board of Directors’Responsibilities
Director communication with third parties
strong communication of a board’s thinking to the company’s shareholders is
important. There are multiple ways of going about it. For example, companies may
wish to designate certain directors – as and when appropriate and in coordination
with management – to communicate directly with shareholders on governance and
key shareholder issues, such as CEO compensation. Directors who communicate
directly with shareholders ideally will be experienced in such matters.

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Critical activities of the board; setting the agenda
The full board (including, where appropriate, through the non-executive chair
or lead independent director) should have input into the setting of the board agenda.
Over the course of the year, the agenda should include and focus on the following
items, among others:
 A strong, forward-looking discussion of the business.
 The performance of the current CEO and other key members of management
and succession planning for each of them.
 Creation of shareholder value, with a focus on the long term.
 Major strategic issues (including material mergers and acquisitions and major
capital commitments) and long-term strategy.
 The board should receive a balanced assessment on strategic fit, risks and
valuation in connection with material mergers and acquisitions.
 Standards of performance, including the maintaining and strengthening of the
company’s culture and values.
 Material corporate responsibility matters.
 Shareholder proposals and key shareholder concerns.
 As authorized and coordinated by the board, directors should have unfettered
access to management, including those below the CEO’s direct reports.
 At each meeting, to ensure open and free discussion, the board should meet
in executive session without the CEO or other members of management. The
independent directors should ensure that they have enough time to do this
properly.
 The board (or appropriate board committee) should discuss and approve the
CEO’s compensation.
 In addition to its other responsibilities, the Audit Committee should focus on
whether the company’s financial statements would be prepared or disclosed
in a materially different manner if the external auditor itself were solely
responsible for their preparation.
III. Shareholder Rights
 Many companies and asset managers have recently reviewed their
approach to proxy access. Others have not yet undertaken such a review or may
have one under way. Among the larger market capitalization companies that have
adopted proxy access provisions, generally a shareholder (or group of up to 20
shareholders) who has continuously held a minimum of 3% of the company’s
outstanding shares for three years is eligible to include on the company’s proxy
statement nominees for a minimum of 20% (and, in some cases, 25%) of the
company’s board seats. Generally, only shares in which the shareholder has full,
unhedged economic interest count toward satisfaction of the ownership/holding
period requirements. A higher threshold of ownership (e.g., 5%) often has been
adopted for smaller market capitalization companies (e.g., less than $2 billion).

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 Dual class voting is not a best practice. If a company has dual class
voting, which sometimes is intended to protect the company from short-term
behavior, the company should consider having specific sunset provisions based
upon time or a triggering event, which eliminate dual class voting. In addition, all
shareholders should be treated equally in any corporate transaction.
 Written consent and special meeting provisions can be important
mechanisms for shareholder action. Where they are adopted, there should be a
reasonable minimum amount of outstanding shares required in order to prevent a
small minority of shareholders from being able to abuse the rights or waste corporate
time and resources.
IV. Public Reporting
 Transparency around quarterly financial results is important.
 Companies should frame their required quarterly reporting in the
broader context of their articulated strategy and provide an outlook, as appropriate,
for trends and metrics that reflect progress (or not) on long-term goals. A company
should not feel obligated to provide earnings guidance – and should determine
whether providing earnings guidance for the company’s shareholders does more
harm than good.
 As appropriate, long-term goals should be disclosed and explained in a
specific and measurable way.
 A company should take a long-term strategic view, as though the
company were private, and explain clearly to shareholders how material decisions
and actions are consistent with that view.
 Companies should explain when and why they are undertaking
material mergers or acquisitions or major capital commitments.
V. Board Leadership (Including the Lead Independent Director’s
Role)
 The board’s independent directors should decide, based upon the
circumstances at the time, whether it is appropriate for the company to have
separate or combined chair and CEO roles. The board should explain clearly
(ordinarily in the company’s proxy statement) to shareholders why it has separated
or combined the roles.
 If a board decides to combine the chair and CEO roles, it is critical that the
board has in place a strong designated lead independent director and governance
structure.
 Depending on the circumstances, a lead independent director’s
responsibilities may include
 Serving as liaison between the chair and the independent directors

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 Presiding over meetings of the board at which the chair is not present,
including executive sessions of the independent directors
 Ensuring that the board has proper input into meeting agendas for, and
information sent to, the board
 Having the authority to call meetings of the independent directors
 Guiding the annual board self-assessment
 Guiding the board’s consideration of CEO compensation
 Guiding the CEO succession planning process
VI. Compensation of Management
 To be successful, companies must attract and retain the best people – and
competitive compensation of management is critical in this regard. To this end,
compensation plans should be appropriately tailored to the nature of the company’s
business and the industry in which it competes. Varied forms of compensation may
be necessary for different types of businesses and different types of employees.
 Compensation should have both a current component and a long-term
component.
 Benchmarks and performance measurements ordinarily should be disclosed
to enable shareholders to evaluate the rigor of the company’s goals and the goal-
setting process. That said, compensation should not be entirely formula based, and
companies should retain discretion (appropriately disclosed) to consider qualitative
factors, such as integrity, work ethic, effectiveness, openness, etc.
 Companies should consider paying a substantial portion (e.g., for some
companies, as much as 50% or more) of compensation for senior management in
the form of stock, performance stock units or similar equity-like instruments. The
vesting or holding period for such equity compensation should be appropriate for the
business to further senior management’s economic alignment with the long-term
performance of the company.
 If a company has well-designed compensation plans and clearly explains its
rationale for those plans, shareholders should consider giving the company latitude
in connection with individual annual compensation decisions.
 If large special compensation awards (not normally recurring annual or
biannual awards but those considered special awards or special retention awards)
are given to management, they should be carefully evaluated and – in the case of
the CEO and other “Named Executive Officers” whose compensation is set forth in
the company’s proxy statement – clearly explained.

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This Task force developed the Policy Brief on Corporate Governance of Banks in
Asia (June 2006). The main issues and priorities for reforms in Corporate
Governance of banks in Asia that were identified are:
 The responsibility of individual board members –fiduciary duties of bank,
board members need of skill, persona abilities. Training programs on integrity and
professionalism
 The roles/functions of the board – guiding, approving and overseeing
strategies/policies rather than being immersed in day-to-day operations. Creating
clear accountability lines and internal control systems. Sufficient flows of information
and managerial support.
 The composition of the board – banks are more encouraged to have
independent directors than other firms. Separation between Chairman and CEO.
 The committees of the board – audit committee, the Risk Management
Committee, The Governance Committee with combined responsibilities of
Nomination, remuneration, succession planning, training, performance evaluation,
etc.
 Preventing abusive related party transactions – inspection of the existing
firewall. Creation of specialized committee to monitor and approve related part
transaction. Publicly disclose such transaction.
 Bank holding companies and groups of companies holding banks – a bank’s
parent company should not impede the full exercise of the Corporate Governance of
the bank within the banking group.
 Disclosure – effort on meeting into international standards on accounting, etc.
should be encouraged.
 Bank’s autonomy in relation to the state – state as owner should respect the
legal corporate structures of State Owned Commercial Banks (SOCB).
 Bank’s monitoring of the Corporate Governance structure of its corporate
borrowers Extent to which banks should assess/monitor Corporate Governance of
their corporate borrowers or seek to improve it.
2.1.3 Asian Round Table on CorporateGovernance (ARCG)

25 | P a g e
Corporate governance is not a new concept but it has got popularity in the last few
decades due to various crises such as: East Asian crisis of the late 1990s and
various other fraudulent activities in the corporate world. Now every country
recognizes that the good corporate governance is essential for the efficiency and
growth of domestic economy. Some benefits of good corporate governance are
 Good corporate governance is actually a balance of power among
managers, shareholders, and boards. It ensures that the transparency standards are
inline with international requirements, shareholders are treated equally, and that the
board and auditors are independent. It is empirically proved that good governance is
essential for good business which is the need of every organization.
 Good corporate governance helps in achieving greater fairness and
transparency and also discourages fraud Lipman and Lipman (2006). It protects the
rights of shareholders along with protecting the long term strategic objectives of the
organization. The importance of good corporate governance in the modern state and
society could be elaborated in the discussion given below.
 Corporate governance ensures the careful management of an
organization because there are various important decisions which could benefit any
actor such as: shareholder, directors, social welfare etc. Basically, there are two
views regarding the maximization of economic interests. One is the Anglo-American
view which is directed towards the improvement of owner’s economic interest. Other
is Non Anglo- American view which encourages the social welfare of society.
 Corporate governance can be used to encourage, measure and project
the integrity. Stability of Stock Prices Stability of stock prices is one of the important
factors for the investors to predict the future performance of a company or
organization.
 Corporate governance has great impact on the efficiency of stock
markets. Investors are always attracted towards well governed companies because
such companies adopt transparent governance policies and have better financial
accountability and higher profit margins. There is a worldwide effort to improve the
2.1.4 Benefit of Good Corporate Governance

26 | P a g e
corporate governance and insure greater shareholder accountability and corporate
transparency. Therefore, those organizations which are seeking new funds for
businesses must ensure good corporate governance in place. Stock prices stability
shows the level of risk for investment. Investors will only invest if they undertake
appropriate risk for their investment.
 Training of Directors It is very difficult for the organizations to find the
right people for the jobs, and train them once they are selected. When the directors
are selected they come up with different experiences, expertise and qualifications. It
is therefore important to train the directors so that they adhere to the good corporate
governance practices. Directors are the major integral part of an organization. They
have major role in the decision making process and thus the success or failure of an
organization is largely dependent upon them. If the directors are incompetent,
careless or selfish then the chances of success are dark.
 Corporate governance encourages the honest and transparent
monitoring of each and every activity. It also assists the training and development of
directors so that they can perform well in decision making process.
 Improved Shareholder Communication Shareholders communication
refers to the investors’ ability to vote their shares. It is the process by which
individual investors could communicate with the companies in which they invest.
Corporate governance could be used as a tool for improving the shareholders
communication. Goodwill and Market Reputation Many organizations spend huge
sums of money to build their brand image because it is imperative for the long term
success of organization. Goodwill and the reputation can be improved through
various tactics such as: marketing, corporate social responsibility, strong relationship
with the stakeholders etc. Corporate Governance also develops the goodwill of
company over a period of.
 With the help of good corporate governance, organizations build strong
customer relationship which leads to the development of brand loyalty. Those
organization which have good corporate governance, enjoys good market reputation.
In the absence of corporate governance, the goodwill of an organization is at stake
because any fraudulent activity will spoil the image of company.

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 Part-2
Since the stock market debacle and aftermath of the 1997 financial crisis in Asia,
and in view of recent corporate scandals in the USA and other developed countries,
the concern about corporate governance has increased in Bangladesh and
elsewhere. The moral hazard problems created an atmosphere in which political
skills are more important to success than is the business skills. The majority of these
failures have been attributed to an absence or dereliction of efficient disclosure and
corporate governance (Okeahalam, 2004). It has been argued that in most
developing countries the reform process through corporate governance has been
difficult and slower than expected due to the complexity and path dependency of the
economic, social, legal structures and law enforcement in these countries is
compromised the fact that the courts are under-financed, under resourced and lack
the necessary expertise (Ararat and Ugar, 2003). Unfortunately, very little is known
about the Corporate Governance practices in Bangladesh. One of the most
important barriers for conducting a study is the difficulty of obtaining relevant
information. The easiest source of information is the corporate laws and very little
information is available with respect to the practice of corporate governance in
Bangladesh.
Since the early 1990s, CG has been receiving increasing attention from
regulatory bodies and practitioners worldwide. Corporate sectors are still in its
initial stage; nevertheless awareness of the importance of CG is growing.
Bangladesh's small size and lack of natural resources have necessitated an open
trade policy. Bangladesh also has a liberal policy towards foreign direct
investment (FDI). However, when compared to those of the India, Sri Lanka,
Pakistan, Thailand and Malaysia, CG in practice and philosophy have up till now
remained relatively under-developed in Bangladesh. Further, there appears to be
a lack of either market or structural governance mechanisms to discipline errant
managers. To govern the corporate environment in Bangladesh, following legal
measures are in practice:
•Securities and Exchange Ordinance 1969
•Bangladesh Bank Order 1972
•Bank Companies Act 1991
•Financial Institutions Act 1993
2.2.1 Introduction
2.2.2.1 History of Corporate governance in Bangladesh

28 | P a g e
•Securities and Exchange Commission Act 1993
•Companies Act 1994
•Bankruptcy Act 1997
However, to institutionalize the practice of CG in Bangladesh, first initiative was
undertaken by the Securities and Exchange Commission (SEC). SEC issued a
notification on Corporate Governance Guidelines (CG Guidelines) for the publicly
listed companies of Bangladesh under the power vested on the Commission by
Section 2CC of the Securities and Exchange Ordinance, 1969. The CG
Guidelines were issued on a ‘comply or explain’ basis, providing some ‘breathing
space’ for the companies to implement on the basis of their capabilities.
Nevertheless, the overall framework for investor protection and CG has a number
of important weaknesses that have hindered the capital market development.
Most of the companies depend on the banks as their major source of financing.
Capital market in Bangladesh is still at an emerging stage with market
capitalization amounting to only 6.5% of GDP with low investor confidence on
corporate governance and financial disclosure practices in many companies
listed in the stock exchanges.1 The neighbouring countries are well ahead vis-à-
vis Bangladesh in terms of depth of capital market. For example, in India,
Pakistan and Sri Lanka, the market capitalization is 56%, 30% and 18% of their
GDP respectively
Corporate governance practices in Bangladesh are quite absent in most
companies and organizations. In fact, Bangladesh has lagged behind its
neighbours and the global economy in corporate governance. One reason for
this absence of Corporate Governance is that most companies are family
oriented. Moreover, motivation to disclose information and improve governance
practices by companies is felt negatively. There is neither any value judgment
nor any consequences for corporate governance practices. The current system
in Bangladesh does not provide sufficient legal, institutional and economic
motivation for stakeholders to encourage and enforce corporate governance
practices; hence failure in most of the constituents of corporate governance is
witness in Bangladesh. Some of the individual constituents that have been
identified by
 Poor bankruptcy laws
 No push from the international investor community
 Limited or no disclosure regarding related party transactions
 Weak regulatory system
 General meeting scenario
 Lack of shareholder active participations
2.2.2.2 Current Scenario Of Corporate governance in Bangladesh

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Under the condition of SEC’s notification No. SEC/CMRRCD/2006-158/Admin/02-08
dated 20th February 2006 issued under section 2CC of the Securities and Exchange
Commission Ordinance 1969, Securities and Exchange Commission gives some
guidelines to the companies which are enlisted under SEC and all the company
under SEC need to follow those guidelines. If they did not follow, then they are
advised to mention the reasons. The guidelines contain four different part and these
are- Board of Directors; Chief Financial Officer(CFO), Head of Internal Audit and
Company Secretary; Audit Committee; Statutory/ External Auditors engaged or not.
Board of Directors
In case of board size, the number of board members of the company should be less
than 5 (five) and more than 20 (twenty). Besides every company should encourage
independent directors who are effective and the independent director should be
appointed by the elected directors. According to Fama and Jensen (1983, cited in
Hasan, Hossain, and Swieringa, 2013), he board, which comprises of a number of
independent directors, has a greater monitoring and controlling ability over
management’. In this case, the number of independent directors should be one out
of ten boards of directors. Moreover, the chairman of the board and Chief Executive
Officer (CEO) must be different person and what is their respective role and
responsibility would be clearly defined by the board of directors. In some Asian
Countries (e.g., Japan), the board of directors seems to serve mainly ceremonial
purposes since they do not represent the shareholders’ interest. However, it is not
possible to find out whether corporate boards are ceremonial in nature or effective
decision-making bodies. The directors of the companies should disclose some other
information to shareholder-
 Fairness of state of affairs/ Financial Statements
 Maintenance proper books of accounts
 Consistent application of accounting policies in preparation of financial
 Compliance with International Accounting Standard
 Soundness and efficiency of internal control system
 Ability of Company to continue as a going concern
 Significant deviations from last year in operating results
 Presentation of key operating and financial data for last three years
 Declare dividend
 Number of board meetings held during the year and attendance by each
director
2.2.3 Guideline of Corporate Governance by Securities and Exchange
Commission of Bangladesh (SECB)

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 Sharing Pattern
Chief Financial Officer (CFO), Head of Internal Audit and Company Secretary
In this part, the company should appoint a CFO, a Head of Internal Audit and
Company Secretary. Moreover, the Board of Directors should clearly define the
respective role and responsibility of those particular appointed person. The Cadbury
Committee on Corporate Govrnence (Cadbury, 1995 cited in Kha et al, 2009)
reconized the company secretary’s unique position as a key role in ensuring that
board procedures are followed and regularly reviewed. Besides, the attendance in
board meeting of those particular appointed person is also essential which a
company should disclose in the annual report.
Audit Committee
Audit committee of a company should act as a subcommittee of the Board of
Directors. This committee will responsible to the Board of Directors and ensure 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. Moreover,
the argument to reduce agency conflicts, audit committee act as a monitoring
mechanism and their act has been emphasized by many researchers(e.g., Abbot
and Parker, 2000; Chen et al. 2005, Kha et al, 2009). The duties of the audit
committee are-
 Audit committee should be composed of at least 3 members and out of them
1 should be independent directors.
 If the member number becomes less than 3, then the Board of Director should
appoint new member immediately or not later than 1 month from the vacancy.
 The Board of Directors should select a chairman of the Audit Committee who
should a professional qualification or knowledge, understanding and experiencing in
accounting or finance There are some other factor that the Audit Committee should
report to the Board of Directors, Authorities and the Shareholders and General
Investors. This are-
 All the activities should be reported to the Board of Directors but there are
some factors that should report immediately to the Board of Directors.
(a) Report on conflict interests;
(b) Suspected or presumed fraud or irregularity or material defect in the
internal control system;
(c) Suspected infringement of laws, including securities related laws,
rules and regulations; and
(d) Any other matter which should be disclosed to the Board of
Directors immediately.
 If Audit Committee monitors any material impact on the financial condition,
then they will discuss with the Board of Director. If any rectification is necessary
about this matter but neither Board of Director nor management takes care regarding

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this matter, then Audit Committee should report to the Commission. In this case,
Audit Committee should consider two thing which occur earlier-
(a) They will inform Board of Director for three times, or
(b) They have to wait a period of nine months from the date of first
reporting to the Board of Directors.
 Those four factors should report immediately to the Board of Directors, should
be signed by the Chairman of the Audit Committee and disclosed in the annual
report of the issuer company
External/ Statutory Auditors
The company should not engage its external auditors to perform the following
services of the company; namelyo
Appraisal or valuation services or fairness opinions;
 Financial information systems design and implementation;
 Book-keeping or other services related to the accounting records or financial
statements;
 Broker-dealer services;
 Actuarial Services;
 Internal audit services; and
 Any other services that the Audit Committee determines.
Reporting the Compliance in the Director’s Report
The directors of the company shall state, in accordance with the annexure attached,
in the directors’ report whether the company has complied with these conditions. A
compliance report of Southeast bank is given in this report
Board of directors and management of a bank should comprise of the competent and
professionally skilled persons with a view to ensuring good and corporate
governance in the bank management. It is also inevitable to have specific
demarcation of responsibilities and authorities between these controlling bodies over
bank's affairs. In absence of specific division of
responsibilities and authorities, even in spite of these bodies' being formed with
skilled and efficient persons, the desired goals of an institution cannot be achieved
2.2.4 Guidelines for Corporate governance of Bangladesh Bank

32 | P a g e
due to lack of transparency and accountability of all concerned. Such kind of
situation is more undesirable in an institution like bank-company as it deals with
huge public money and interests of the depositors.
In view of the above, rescinding the previous instructions8 the specific demarcation of
responsibilities and authorities among the board of directors, its chairman, Chief
Executive Officer (CEO) of and adviser to the private bank in respect of its overall
financial, operational and administrative policymaking and executive affairs including
overall business activities, internal control, human resources management and
development thereof, income and expenditure etc. along with lending and risk
management issues, is outlined as follows:-
Responsibilities and authoritiesof the board of directors:
(a) Work-planning and strategic management:
(i) The board shall determine the objectives and goals and to this end
shall chalk out strategies and work-plans on annual basis. It shall specially engage
itself in the affairs of making strategies consistent with the determined objectives and
goals and in the issues relating to structural change and reorganization for
enhancement of institutional efficiency and other relevant policy matters. It shall
analyze/monitor at quarterly rests the development of implementation of the work-
plans.
(ii) The board shall have its analytical review incorporated in the Annual
Report as regard the success/failure in achieving the business and other targets as
set out in its annual work-plan and shall apprise the shareholders of its
opinions/recommendations on future plans and strategies. It shall set the Key
Performance Indicators (KPIs) for the CEO and other senior executives and have it
evaluated at times.
(b) Lending and risk management:
(i) The policies, strategies, procedures etc. in respect of appraisal of
loan/investment proposal, sanction, disbursement, recovery, reschedulement and
write-off thereof shall be made with the board's approval under the purview of the
existing laws, rules and regulations. The board shall specifically distribute the power
of sanction of loan/investment and such distribution should desirably be made
among the CEO and his subordinate executives as much as possible. No director,
however, shall interfere, directly or indirectly, into the process of loan approval.
(ii) The board shall frame policies for risk management and get them
complied with and shall monitor at quarterly rests the compliance thereof.
(c) Internal control management:
The board shall be vigilant on the internal control system of the bank in order to
attain and maintain satisfactory qualitative standard of its loan/investment portfolio. It
shall review at quarterly rests the reports submitted by its audit committee regarding
compliance of recommendations made in internal and external audit reports and the
Bangladesh Bank inspection reports.

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(d) Human resources management and development:
i.Policies relating to recruitment, promotion, transfer, disciplinary and
punitive measures, human resources development etc. and service rules shall be
framed and approved by the board. The chairman or the directors shall in no way
involve themselves or interfere into or influence over any administrative affairs
including recruitment, promotion, transfer and disciplinary measures as executed
under the set service rules. No member of the board of directors shall be included in
the selection committees for recruitment and promotion to different levels.
Recruitment and promotion to the immediate two tiers below the CEO shall,
however, rest upon the board. Such recruitment and promotion shall have to be
carried out complying with the service rules i.e., policies for recruitment and
promotion.
ii.The board shall focus its special attention to the development of skills
of bank's staff in different fields of its business activities including prudent appraisal
of loan/investment proposals, and to the adoption of modern electronic and
information technologies and the introduction of effective Management Information
System (MIS). The board shall get these programs incorporated in its annual work
plan.
(e) Financial management:
(i) The annual budget and the statutory financial statements shall finally
be prepared with the approval of the board. It shall at quarterly rests review/monitor
the positions in
respect of bank's income, expenditure, liquidity, non-performing asset, capital base
and adequacy, maintenance of loan loss provision and steps taken for recovery of
defaulted loans including legal measures.
(ii) The board shall frame the policies and procedures for bank's
purchase and procurement activities and shall accordingly approve the distribution of
power for making such expenditures. The maximum possible delegation of such
power shall rest on the CEO and his subordinates. The decision on matters relating
to infrastructure development and purchase of land, building, vehicles etc. for the
purpose of bank's business shall, however, be adopted with the approval of the
board.
(f) Formation of supporting committees:
For decision on urgent matters an executive committee, whatever name called, may
be formed with the directors. There shall be no committee or sub-committee of the
board other than the executive committee and the audit committee. No alternate
director shall be included in these committees.
(g) Appointment of CEO:
The board shall appoint a competent CEO for the bank with the approval of the
Bangladesh Bank.

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Responsibilities of the chairman ofthe board of directors:
(a) As the chairman of the board of directors (or chairman of any committee
formed by the board or any director) does not personally possess the jurisdiction to
apply policymaking or executive authority, he shall not participate in or interfere into
the administrative or operational and routine affairs of the bank.
(b) The chairman may conduct on-site inspection of any bank-branch or
financing activities under the purview of the oversight responsibilities of the board.
He may call for any information relating to bank's operation or ask for investigation
into any such affairs; he may submit such information or investigation report to the
meeting of the board or the executive committee and if deemed necessary, with the
approval of the board, he shall effect necessary action thereon in accordance with
the set rules through the CEO.
(c) The chairman may be offered an office-room, a personal
secretary/assistant, a telephone at the office and a vehicle in the business-interest of
the bank subject to the approval of the board.
Responsibilities of the adviser:
The adviser, whatever name called, shall advise the board of directors or the CEO
on such issues only for which he is engaged in terms of the conditions of his
appointment. He shall neither have access to the process of decision-making nor
shall have the scope of effecting executive authority in any matters of the bank
including financial, administrative or operational affairs.
Responsibilities and authoritiesof the CEO:
The CEO of the bank, whatever name called, shall discharge the responsibilities and
effect the authorities as follows:
(a) In terms of the financial, business and administrative authorities vested
upon him by the board, the CEO shall discharge his own responsibilities. He shall
remain accountable for achievement of financial and other business targets by
means of business plan, efficient implementation thereof and prudent administrative
and financial management.
(b) The CEO shall ensure compliance of the Bank Companies Act, 1991
and/or other relevant laws and regulations in discharge of routine functions of the
bank.
(c) The CEO shall report to Bangladesh Bank of issues violative of the Bank
Companies Act, 1991 or of other laws/regulations and, if required, may apprise the
board post facto.
(d) The recruitment and promotion of all staff of the bank except those in the
two tiers below him shall rest on the CEO. He shall act in such cases in accordance
with the approved service rules on the basis of the human resources policy and
sanctioned strength of employees as approved by the board. The board or the
chairman of any committee of the board or any director shall not get involved or
interfere into such affairs.

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In the context of Bangladesh, the "ill- equipped" structure has been unable to
address the corporate governance challenges to make it effective and efficient. We
should first identify the challenges before pointing out the ill- equipped structure.
Adoption of a standard framework: The first challenge is to adopt corporate
governance in line with standard framework making the management accountable
and responsible to the Board and the Board to the shareholders/stakeholders. The
Board's general approach is to act as a self-declared leader-with the 'my company'
or 'my governance' attitude. As such the Board likes to stay beyond accountability
and perform its duty in whatever way it likes.
Function of independent wings: In corporate governance framework, there are
some independent internal and external wings for ensuring accountability in
managing resources and reporting thereof. How far the independent director(s)
works independently in the Board? The selection and appointment of independent
directors stems from the requirement of Securities and Exchange Corporate
Governance Guidelines, where the Board appoints such director(s), subject to
approval at the Annual General Meeting (AGM).
Transparent disclosures: The top-most challenge in Bangladesh to implement
corporate governance is to disclose the adequate and appropriate information in the
financials. Very few companies as listed with Stock Exchanges excepting some large
reputable companies disclose information correctly. If we consider the similar pattern
of reporting on the same information as required by law, Bangladesh Financial
Reporting Standards (BFRS), and regulations of regulators most of the companies
are found to be varied in presentation with adequate and appropriate information
from each other excepting banks and financial institutions. In case of banks or
financial institutions, the similarity in presentation is found as per regulations of the
Bangladesh Bank. The adequacy and appropriateness of this information are, of
course, challenging to all companies even to the banks and financial institutions.
Protecting shareholders' interest: In protecting the interest, challenges arise in
order to ensure compliance of laws and policies. The nomination committee may be
biased to nominate any directors instead of someone who may act for the interest of
shareholders. The company meets for exercising their right on time, protection of
related party transactions and disclosures. Extraordinary transactions, either income
or expenses, may not be provided properly or may not be brought to the notice of the
shareholders. It is really very challenging to work for a company sustaining interest
of all shareholders, where the Board or members of the Board do not care about
shareholders' interest and act for their own benefit using the platform of the
company.
2.2.5 Challenges of corporate governance in Bangladesh

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Focus on short-term profit: The Board has a tendency to gain profit. Therefore, it
moves with a strategy to capture and sustain market position in any situation with
diversified products and service qualities and other strategies attaining competitive
advantage. In response to fight against the challenges Sir Adrian Cadbury said, "
These challenges are all the more daunting because of the complexity of the
ownership structure of the corporate sector, interlocking relationships with
government and the financial sector, weak legal and judicial systems, absent or
underdeveloped institutions, and scarce human resource capabilities."
A developing country like Bangladesh, fighting against challenges is really difficult
due to
(i) Proprietorship or partnership or limited-liability company having capital
market participation but wanting to hold family business control;
(ii) Government's political participation in the Board of state-owned banks and
financial institutions or any other state-owned organizations;
(iii) Outdated laws to govern and cater to corporate governance framework
and the failure to face the challenges on many grounds and to establish
the rule of law, and
(iv) Substandard human resources or badly cultured workforce who fail to
adopt the changes or accept challenges with professional integrity and
ethical value.

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Chapter 3
Organizational Perspective

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Part 1
The emergence of Southeast Bank Limited (SBL) was at the juncture of liberalization
of global economic activities. The experience of the prosperous economies of the
Asian countries and in particular of South Asia has been the driving force and the
strategic operational policy option of the Bank. The company philosophy – “A Bank
with Vision” has been precisely an essence of the legend of success in the Asian
countries.
Southeast Bank Limited, “A Bank with a Vision”, emerged as a 2nd Generation
Commercial Banking Industry of Bangladesh in the year 1995. It was incorporated on
March 12, 1995 as a public limited company according to the Companies Act 1994.
The commencement of its banking business occurred on May 25, 1995 by the
Principal Branch located at the Annex Building, 1 Dilkusha Commercial Area,
Motijheel, Dhaka. The Head Office of the Bank is also located at the same address
on the 3rd floor of Annex Building. The Bank started with an authorized capital of Tk.
500 million and paid up capital of Tk. 100 million. Southeast Bank Limited started its
business with the inaugural Chairman Mr. Mohammad Abul Kashem, Vice Chairman
Mr. Ragib Ali and the first and former President and Managing Director of the Bank
Mr.Sayed Anisul Huq Southeast Bank Limited is a scheduled commercial bank in the
private sector, which is focused on the established and emerging markets of
Bangladesh. Southeast Bank Limited has 21 branches throughout Bangladesh and
its aim is to be the leading bank in the country’s principal markets. The branches are
situated in the prime business locations of Bangladesh. Among the 21 branches, 10
branches are in the capital city Dhaka, 4 in the port city Chittagong, 3 in Sylhet, 1 in
Khulna, 1 in Moulvibazar. The other 2 branches are opened in 2003 and with Islami
banking concept which are operating in Feni and Cox’s Bazaar. The bank by
concentrating on the activities in its area of specialization has achieved good market
reputation with efficient customer service. The Bank is committed to providing
continuous training to its staff to keep them up to date with modern practices in their
respective fields of work. The Bank also tries to fulfill its share in community
responsibilities. By such measures, the Bank intends to grow and increase
shareholders’ earning per share. Southeast Bank Limited pledges to maximize
customer satisfaction through services and build a trusting relationship with
customers, which has stood the test of time for the last eight years.
SLOGAN: “A BANK WITH VISION”
3.1.1 COMPANY OVERVIEW

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To stand out as a pioneer banking institution in Bangladesh and contribute
significantly to the national economy.
The missions of Southeast Bank Limited are as follows:
 High quality financial services with the help of latest technology
 Fast and accurate customer service
 Balanced growth strategy
 High standard business ethics
 Steady return on shareholder’s equity
 Innovative banking at a competitive price
 Deep commitment to the society and the growth of national economy
 Attract and retain quality human resources
Management Strategies:
The deposit schemes of SBL include current, savings and fixed deposits. In line with
other banks in the peer group, this Bank has also introduced several attractive
savings packages like pension savings scheme, education scheme and savers
benefit deposit scheme. SBL has a wide cluster of lending packages, which include
commercial lending, working capital, house building loan, small medium and large
scale industry loan, loan against export and other consumer loans. SBL has always
been one of the major players in the country in promoting diversified banking
services. Over the years it has provided sincere and timely services through the
innovation of multifarious modern banking products. The major areas where SBL
provides financing facilities are corporate banking, micro credit financing, investment
in house building financing companies and various loan syndication. SBL has
3.1.4 STRATEGIES
3.1.3 MISSION
3.1.2 VISION

40 | P a g e
introduced SWIFT to facilitate quick fund transfer and Reuter to facilitate foreign
exchange trading. With eight other banks this bank gives its customers the facilities
of shared ATM services throughout day and night i.e. 24 hours banking.
The business strategy:
The business strategy of SBL is to strengthen its traditional lending in small retail
business, following a conservative lending approach in the areas of large and
medium industrial ventures. The management approach of maintaining loan quality
is also appreciable. Although Bangladesh economy is led by garments sector, it is
worth nothing that he exposure of the Bank in this sector is negligible. Therefore, the
existing depressed scenario of garments will have little impact on the Bank. The
Bank is constrained by limited branch network. Realizing the importance of this
network for its entity to low cost saving deposits, the Bank has taken a dynamic step
for opening additional branches. Till such time having adequate branch network, the
Bank needs effective communication system including advance online banking with
the existing branch network for information flow as a part of its management
strategy.
Marketing Strategies:
As the bank has expertise in loan and club financing, SBL management wants to
attract more corporate clients to avail their financing facilities of this nature in the
years to come and thereby system the growth of the loans of this type. SBL also
targeted small and medium scale entrepreneur (SMEs) in the coming years is in the
process of signing with SEDF (South Asian Entrepreneur Development Fund) in
collaboration with the World Bank and few other donor agencies for technical and
training assistance. The Bank has a plan to explore the market in future through
exposing several loan schemes in IT sectors and various SMEs. SBL’s export,
import and guarantee businesses have been growing at a good pace since its
inception. Although the figures shows that SBL has been doing pretty well compared
to the peers, but it have to go a long way in the future to keep pace with the like
banks.
Southeast Bank Limited offers full-fledged banking service including general banking
service, foreign exchange business, investment service etc.
The general banking
 Deposits.:
 Fixed Deposit Account
 Savings Deposit account
 Special Savings Deposit account
 Term Deposit Account

41 | P a g e
 Current account: These account are mainly opened by middle and lower
income groups, sole-proprietorships, partnerships, limited companies, clubs,
societies and associates. There are other deposits that are offered by Southeast
Bank Limited in order to expand its product range so that it can compete with the
other banks. These deposits are as follows:
 Pension savings scheme
 Education savings scheme
 Marriage savings scheme
 Savers beneficial deposit scheme
 General loan scheme
 Consumer credit scheme
 House building loan/Apartment loan scheme
 The foreign exchange business includes
 issuance of Letter of Credit (L/C),
 Foreign Demand Draft (DD),
 Foreign Telegraphic Transfer (TT),
 Inward Remittance,
 Import and Export Financing etc.
 Investment services of the Bank includes
 Small Business Investment Scheme,
 Housing Investment Scheme,
 Small Transport Scheme,
 Transport Investment Scheme,
 Car Loan Scheme,
 Rural development Scheme and etc.
I.Deposit: The prime function of the Bank is to collect money from the clients in
the form of deposits. Different types of deposits accounts are open by clients to get
different types of benefits from the account. In the deposit mix, the Bank earns most
from fixed deposit. The other deposits that are performing well are savings deposit
and current deposit.
II. Loans and Advances: The other major function of the Bank is to give loans
and advances to the clients from the money that they collect as deposits. The main
income of the Bank comes from the interest income that they earn from these loans
and advances. The Bank offers different types of loans and advances to the clients
from different purpose. Detail function of loan and advances are described in the
project part of this report.
3.1.5 Major functions of the Bank are as follows

42 | P a g e
III. Investments: Investment is one of the other functions of the Bank that is
common to all the Banking institutions. The investment portfolio of the Bank includes
Government Treasury Bills, Prize Bonds and shares in Public Limited companies etc.
The bank has always given emphasis on investment of Funds in highly yield areas
simultaneously maintaining Statutory Liquidity Requirement (SLR) as fixed by
Bangladesh Bank.
IV. Treasury Operations: The treasury operations had long been considered as
an important avenue of income generation for the Bank. The foreign banks operating
in Bangladesh earn a considerable amount of their profit through treasury
operations. With automated Reuters Terminal, the Bank has been able to develop its
infrastructure capabilities for treasury dealings. The Bank has taken necessary steps
for treasury dealings more adequately for meeting the demands of the customers.
Southeast bank currently have 12 divisions that are functioning in full-fledged
manner. Among these 12 divisions, recently the Bank has opened its new Islamic
Wing that is working on the Islamic Banking of the Bank. The Bank has already
started two Islamic Banking branches in July 2003 that are already doing business.
The Bank also plans to introduce one new divisions namely Legal Affairs division.
This new division will handle all the legal issues regarding the bank. Each of the
division of the bank and their functions are discussed below:
1. Financial Control and Accounts Division (FCADs): One of the most
important department of Bank or any institution is the Finance and Accounts
Department. The main functions of this department are discussed below in a very
brief manner.
 Budgeting
 Payment of salary
 Financial Analysis
 Disbursement of Bills
 Reconciliation: Provident Fund (PF), Gratuity, Superannuation Fund (SF):
2. Credit Division: The Credit Division of Southeast Bank limited is divided in
two parts. (i) General Credit (ii) Corporate Finance.
i) General Credit: The functions of this division are given below:
 Analysis and appraisal/ evaluation of credit proposals for approval
of Credit Committee
 Preparation of Board Memo
 Communication of Sanction Advice
 Preparation & Submission of periodical returns to Bangladesh
Bank.
3.1.6 FUNCTIONAL DEPARTMENTS

43 | P a g e
ii) Corporate Finance: Under this division all the corporate credit like
industrial credit, long-term project credits etc. are taken into account. SBL recently is
trying to increase the amount of corporate loan portfolio although it has been seen
that most of the other banks are concentrating mainly on consumer loans. The main
functions of corporate credit division are
 Analysis, appraisal / evaluation of credit proposals
 Processing Credit proposals for approval of Credit Committee
 Preparation of Credit Information Memo (CIM) for Board
 Communication of Sanction Advice
3. Loan Administration Division (LAD): The major function of this department
is to monitor the activities of the credit that are already disbursed. The
functions of this department are
 Post Sanction documentation
 Monthly review and Follow up of Loan and Advances (LDO’s)
 Development of Early Warning System (EWS)
 Follow up for recovery of over dues.
 Classification of Loans
 Legal affairs/ Litigation
4. International Division (ID): One of the most important divisions of a bank is
the International division. This is the department where the foreign exchange of the
bank is maintained. Important works like L/C advising, collection of remittances are
also done in this division. The functions of this department are
 To set up Agency Arrangement with correspondent Bank and to
facilitate mutual exchange of business, document and information
 Remittance, for payment to beneficiaries.
 Letters of Credit, Advising, Confirmation, Negotiation, Acceptance,
Payment, Bill, Cheque Collection.
 Guarantees, issuance of, including performance bonds, etc.
 Reconciliation of Nostro Accounts (Accounts with other foreign banks)
 Test keys / Specimen Signature Books for authentication of messages.
 Credit Lines.
 Extending and granting credit lines to correspondent banks for
 confirmation of their L/Cs, issuance of Guarantees, Money Market, FX
Dealings etc.
 Obtaining credit lines from Correspondent Banks as above.
 Maintaining / monitoring record of credit lines obtained / utilized.
 Compile and circulate the foreign exchange circulars to the branches.

44 | P a g e
5. Human Resources Division (HRD): One of the most important departments
of any organization is the Human Resources division because it has to deal
with the whole manpower planning of an organization. The need of
manpower, excess manpower, training to the staff and other works are all
organized by this division. The functions carried out by the HRD of SBL are
 Recruitment, Selection of Manpower and Manpower Planning.
 Arranging and imparting training for Human Resources Development.
Placement, Performance Evaluation, Increment, Promotion, Incentive
Schemes etc.
 Processing of Leave.
 Disciplinary Action
 Formulation / Implementation of Administrative Rules / Policies
 Preparation of Board Memo and Implementation of Board Decisions.
 Employees Service Benefits.
6. Information Technology Division (IT): Information Technology
nowadays is a very critical part of any organization. To have upgrade knowledge
about the world, advanced computer system in order to make the job more efficient
and effective it is very important to have a good IT division. The functions of the IT
division of SBL are
 Monitoring / Supervision of overall computerized banking operations.
 System Administration Data processing and Data Entry.
 Software Development and Maintenance
 Maintenance of Hardware.
7. Logistic and General Services Division: The functions of the
logistics division of SBL are very basic jobs. They are
 To arrange Printing
 Purchase of Security / General stationery.
 To arrange efficient Utility Serv5ices.
 Maintenance of Premises
 Transport pool, Protocol etc.
8. Marketing and Outreach Division: One of the basic divisions of any
organization is the marketing department. The world today is totally dominated by
marketing. The stronger marketing strategy of an organization, the more successful
is the organization. The functions of this division of SBL are
 Cost Benefit Analysis of existing banking products and development of
new products.
 Liability Marketing.
 Branch Expansion.
 Mass Media and Event Management.
 To compile analyze and interpret key Management Information (MIS)

45 | P a g e
9. Branches Control Division (BCD): The functions of this division are
as follows
 Internal Audit and Inspection.
 Compliance / follow up and monitoring of internal inspection.
 Monitoring of General Bank’s Inspection / External Audit Report.
10. Card Division: The card division of SBL is pretty new and small in the
sense that not too many services by this division is offered to the customers. So the
work of the card division is very much limited. The functions of the card division are:
 Managing debit card account and also credit card which is going to be
introduced soon
 All the works that are related to the ATM card like managing the credit
and debit balance of a client.
 Maintaining correspondence with the branches regarding different
clients of ATM card.
 Works related to customer and vendor management.
11. Board and Share Division: The functions of this division are
 Arranging / conducting of Board, EC meeting.
 Preparations of minutes and implementation of Board decisions.
 Company affairs.
 Issuance of Bank’s share etc.

46 | P a g e
Part 2
Corporate Governance is based on several critical principles. They include an
independent, active and engaged Board of Directors which has the skill to properly
evaluate and oversee the business process, business and financial performance,
internal control and compliance structure and direct management on strategic and
policy issues. On the other hand, the Board has to ensure that the management
headed by Chief Executive Officer (CEO) fully discharge their day to day
administrative responsibilities prescribed by BB and the Board itself and necessarily
refrain themselves from micro management of the management affairs. Southeast
Bank Ltd. recognizes the importance of good corporate governance as a major factor
in enhancing the efficiency of the organization. The Bank therefore seeks to
enctheirage the conduct of its business to be in line with the principles of good
corporate governance, which form a basis for sustainable growth.
Southeast Bank operates within the legal framework of the Companies Act-1994 and
as a banking company, complies with the provisions of the Bank Company
(Amendment) Act-2013. It also complies with the directives and guidelines issued
from time to time by Bangladesh Bank and Bangladesh Securities and Exchange
Commission. The Bank has responsibly managed and supervised in fulfilment of the
objectives of adding value to the shareholder wealth and contributing to the national
economy. Their Corporate Governance principles serve the goal of strengthening
and consolidating company position with sustained growth objectives in materializing
the trust placed in the company by the shareholders, clients, employees and the
general public. Fair practice, accountability, transparency, compliance, value
creation and corporate social responsibility are the pillars of their corporate
governance. The Bank’s corporate governance structure comprises the
Shareholders, the Board, Bank Management, Regulatory Authorities, Independent
External Auditors and Employees.
3.2.1Introduction
3.2.2 ConceptualFramework

47 | P a g e
As on 31 December 2015, the Directors of Southeast Bank Limited held 18.32% of
total shares whereas Financial Institutions and General Public are holding 30.67%
and 51.01% shares respectively.
Sl
No.
Composition 31-12-15 31-12-14
No. of
shares held
% of total
share
No. of shares
held
% of total
share
1 Directors 168,011,868 18.2 166,186,868 18.12
2 General Public 467,707,676 51.01 538,628,627 58.74
3 Financial
Institution
281,230,632 30.67 2125,134,681 23.13
Total 916,950,176 100% 916,950,176 100%
Pattern of Shareholding
i) Shares held by Parent/Subsidiary/Associated Companies and other related Parties
NIL
ii) Ownership of Company’s Securities by the Members of Board of Directors.
Name Of the Directors No. of Shares Value In Tk. Percent
age
Alamgir Kabir, FCA 19,694,672 19,694,6720.00 2.15
Ragib Ali 28, 28,026,291 28,026,2910.00 3.06
M. A. Kashem 20,307,060 20,307,0600.00 2.21
Azim Uddin Ahmed 25,490,735 25,490,7350.00 2.78
Duluma Ahmed 19,082,742 19,082,7420.00 2.08
Jusna Ara Kashem 18,339,525 18,339,5250.00 2.00
Md. Akikur Rahman 18,443,731 18,443,7310.00 2.01
Rehana Rahman 18,344,145 18,344,1450.00 2.00
Sirat Monira, representing
public shareholders
120,547 120,5470.00 .01
3.2.3 OwnershipComposition

48 | P a g e
Abdul Hye of Karnafuli Tea
Co. Limited representing
public shareholders
162,420 162,4200.00 .02
Dr. Zaidi Sattar, Independent
Director - - -
- -
A.H.M. Moazzem Hossain,
Independent Director - - -
- -
Shahid Hossain, Managing
Director
- -
Total 168,011,868 168,011,8680.00 100
iii) Shares held by Chief Executive Officer, Company Secretary, Chief Financial
Officer, Head of Internal Audit and their spouses and minor children.
Nil
iv) Shares held by top five salaried Executives in the regular services of the Bank.
Nil
v) List of Shareholders holdings 10% and above shares in the Paid-Up-Capital of the
Bank.
NIL

49 | P a g e
Name Position
Alamgir Kabir,FCA Chairman
Ragib Ali Vice Chairman
M. A. Kashem Directors
Azim Uddin Ahmed Directors
Duluma Ahmed Directors
Jusna Ara Kashem Directors
Md.Akikur Rahman Directors
Rehana Rahman Directors
Sirat Monira Directors
Karnafuli Tea Co. Limited represented
by
Directors
Abdul Hye Directors
Dr. Zaidi Sattar Directors
A.H.M. MoazzemHossain Directors
M. A. Kashem Directors
Shahid Hossain
Zakir Ahmed Khan
Managing
Director
Advisor
Muhammad Shahjahan Company
Secretary
3.2.4 Board of Directors

50 | P a g e
Rotation and Retirementof Directors
In terms of Article 105 (i) of the Articles of Association of the Bank, one-third of the
Directors for the time being or if their number is not three or multiples of three (3)
then the number nearest to one third (1/3rd) shall retire in rotation from office.
The following four (4) Directors will retire in the 21st Annual General Meeting. All
except Dr. Zaidi Sattar are eligible for the re-election in the 21st Annual General
Meeting.
i) Mrs. Duluma Ahmed
ii) Mr. Md. Akikur Rahman
iii) Karnafuli Tea Co. Limited represented by Mr. Abdul Hye
iv) Dr. Zaidi Sattar
Some Important information about them is given below.
Name Expertise Membership Directors in
i) Mrs. Duluma Ahmed Banking
Activities
Audit
committee
(i) Mutual Food Products Ld.
(ii) Mutual Milk Products Ld.
(iii) Mutual Trading Co. Ltd.
ii) Mr. Md. Akikur
Rahman
Banking
Activities
- -
iii) Karnafuli Tea Co.
Limited represented by
Mr. Abdul Hye
Banking
Activities
- -
iv) Dr. Zaidi Sattar Economist Audit
committee
-
Non-Executive Directors
The Managing Director is the only Executive Director on the Board of Directors of the
Bank. All other Directors including the Chairman and the Vice Chairman are the Non-
Executive Directors.
3.2.5 Differentaspectof Board ofdirectors

51 | P a g e
Independent Directors
In compliance with the Corporate Governance Guidelines of Bangladesh Securities
and Exchange Commission (BSEC) and the provisions contained in Bank Company
(Amendment) Act-2013 and the guidelines given by Bangladesh Bank in BRPD
Circular No.11 dated 27 October, 2013, the Bank appointed 2 (two) Independent
Directors observing all required formalities.
Role of the Chairman and that of the ManagingDirector(CEO)
The Chairman of the Bank is elected from amongst the Directors after every Annual
General Meeting in obedience to the Articles of Association of the Bank. The
Managing Director (CEO) of the Bank is appointed by the Board. Bangladesh Bank’s
approval is obtained for the appointment. The functional areas of the Chairman and
that of the Managing Director are sharply bifurcated within the rules of Bangladesh
Bank. But they work in cohesion for the disciplined operation and growth of the Bank.
Structure of the Board
The Board of Directors consists of 13 (thirteen) Directors including the Managing
Director. The Managing Director is an Executive Director (Ex-Officio). All other 12
(twelve) Directors are non-executive directors. Of the 12 nonexecutive directors, 8
(eight) are sponsor directors, 2 directors are from the public shareholders and 2 are
independent directors.
Role and Responsibilities of the Board
The main role and responsibilities of the Board of Directors as envisaged in the
BRPD Circular No.11 dated 27 October, 2013 are the following:
1) Approving suitable business strategy
2) Fixation of operational budgets
3) Approval of financial statements
4) Review of Bank’s operational performance towards achievement of objectives
5) Approval of policies and operational manuals to establish effective risk
management in core banking areas.
3.2.6 Role and Responsibilities of the Board of Directors

52 | P a g e
6) Reviewing company’s corporate governance standard for further improvement
7) Determining Bank’s corporate social responsibility status and taking steps for its
improvement
8) Developing compliance culture in the Bank
9) Approving proposals which are beyond the delegated business / financial /
administrative powers of the Management
10) Appointment of the Chief Executive Officer and fixation of his benefits
11) Purchase or acquire property for the Bank
12) Providing welfare to the employees
13) Making donation for any charitable ventures
14) Devising annual work plan for goals and monitoring its pace of achievement.
15) Analyzing reasons for success or failure of Bank’s annual budget achievement
16) Periodical review of Bank’s operational budget achievement
17) Taking risk management initiatives
18) Review of sufficiency and requirement for internal control efforts of the Bank
19) Reviewing Bank’s human resource policy
20) Bank’s financial management and its periodical review
21) Approving policies or taking Policy decisions for improvement of operation and
compliance culture in the Bank.
Responsibilities of the Chairman of the Board
The chairman discharges his responsibilities within the purview of the provisions
contained in BRPD Circular No.11 dated 27 October, 2013. His main responsibilities
are to :
- Give leadership for Bank’s disciplined growth and operation.
- Ensure non-intervention of any Director in the routine affairs of the Bank.
- Ensure compliance with corporate governance requirements of regulatory
bodies.
-Bring policies for Board’s deliberations and consideration for Bank’s reforms
and development.
- Determine sense of direction for the Bank, etc.
Independence of the Non-Executive Directors
The Non-Executive Directors enjoy full freedom in discharging their responsibility.
They sincerely try to attend all meetings of the Board and its any Committee of which

53 | P a g e
they are members. They actively participate in discussion on any agenda for a well
thought-out decision.
Annual Appraisal of Board’s Performance
The shareholders elect the Directors in the Annual General Meeting. The directors
are accountable to the shareholders. In the Annual General Meeting (AGM), the
shareholders freely speak about the performance of the Bank and make a critical
analysis of the performance of the Board of Directors. The Chairman replies to their
queries made in the meeting. Their constructive suggestions are noted down and
implemented for qualitative improvement of the Bank.
Annual Evaluation of Performance of the Managing Director (CEO) of the Bank
The Board of Directors prescribes the roles and responsibilities of the Chief
Executive Officer (CEO) of the Bank. His performance is assessed on certain Key
Performance Indicators (KPIs). The Board evaluates the performance of the
Managing Director in each month when the month-end financial performance of the
Bank is placed before the Board for review. Apart from that, the Board seeks MD’s
reports on various operational aspects periodically to assess the trend of movement
of the Bank in various indicators. MD’s quality leadership to post better performance
is always expected. The performance of the Managing Director is evaluated again
annually by the Board based on Bank’s operational results mainly in the
achievement of operational budgets.
Policy on Training of Directors
Most of the Directors of the Bank are on the Board for many years. They have
acquired enough knowledge and acumen to lead the Bank well to the path of
progress. The latest legislations on the financial sector and directives of the
regulatory bodies are made available to them for their instant information in order
that they can discharge their responsibility effectively. They also attend various
seminars and symposiums mainly on corporate governance organized by different
professional bodies.
Directors’ Knowledge and Expertise in Finance and Accounting
Mr. Alamgir Kabir, FCA, Chairman of the Bank, is a Post- Graduate in commerce. He
is also a qualified Chartered Accountant. One Independent Director is a Ph.D in
Economics and another Independent Director is a B.A (Hons) and M.A in
Economics. He is also a renowned expert in financial journalism. They have enough

54 | P a g e
knowledge and expertise in the field of Accounting and Finance. Most of the other
Directors are successful entrepreneurs and professionals. They are well conversant
in business, economics and administration.
Remuneration and Benefits to Board Members
The Bank cannot have more than three Committees of the Board of Directors as per
law and rules of Bangladesh. For obvious reasons, activities relating to remuneration
are done by the Board itself.
Benefits provided to the Directors and the Managing Director
In accordance with the guidelines of Bangladesh Bank, the following facilities can
only be given to the Directors.
Chairman An office chamber, one Private Secretary / Office Assistant, a
telephone in office, one mobile phone for use within the
country and a full time car.
Directors Fees and other facilities for attending each meeting of the Board or
its any Committee.
Managing
Director
Only those benefits as are agreed upon in his contractual
appointment and as are approved by Bangladesh Bank
Directors’ Report in Compliance with Best Practices on Corporate Governance
The status of compliance with corporate governance guidelines of Bangladesh Bank
and Bangladesh Securities and Exchange Commission has been given in latter part
of the chapter. Rahman Rahman Huq, Chartered Accountants, duly certified the
Bank’s Compliance Status.
i. Executive Committee
Composition: In compliance with the provisions contained in BRPD Circular No.11
dated 27 October, 2013, the Board of Directors re-constituted the Executive
Committee comprising 5(five) members. To comply with regulatory requirement, no
member of the Audit Committee is included as a member of the Executive
Committee. Responsibilities: The Executive Committee is a body to deliberate on
3.2.7 Board’sCommittees and their Responsibilities

55 | P a g e
generally important issues and matters in the execution of operations of the Bank.
The committee performs within the power delegated to it by the Board of Directors.
The resolutions of the Executive Committee are ratified by the Board of Directors.
The minutes of the Executive Committee are sent to Bangladesh Bank for their
review.
Attendance of members of the Executive Committee in meetings
Name of the
member of
the Executive
Committee
otal no. of
meetings
from
01.01.2015 to
31.12.2015
Total
attenda
nce
Remarks
Alamgir Kabir,
FCA
6 6 The members
who could
not attend
any meeting
were granted
leave of
Absence.
Ragib Ali 6 3
M. A. Kashem 6 2
Azim Uddin Ahmed 6 6
Shahid Hossain
Managing Director
6 6
ii. Audit Committee
The Audit Committee is an important functional Committee of the Board of Directors
of the Bank. It is assigned with oversight of financial reporting, disclosure, regulatory
compliance and disciplined banking operation complying with the rules and norms of
banking.
Feature and Composition
As per rules, any member of the Executive Committee cannot be the member of the
Audit Committee. The Audit Committee was lastly re-constituted by the Board of
Directors in its 461st meeting held on March 29, 2015. Composition: A 6-member
Audit Committee was reconstituted by the Board in compliance with the relevant
provisions contained in BRPD Circular No.11 dated 27 October, 2013 of Bangladesh
Bank The membership and attendance of the members of the Audit Committee are
given below:

56 | P a g e
Sl.
No.
Members Position Meetin
g held
Attendance Remarks
1 Mr. A.H.M. Moazzem
Hossain (Independent
Director)
Chairman 5 5 a) The member who could
not attend any meeting of
the Audit committee was
granted leave of absence.
b) Mrs. Rehana Rahman
was made a member of
the Audit Committee by
the Board of Directors in
its 461st meeting held on
March 29, 2015.
2 Mrs. Duluma Ahmed Member 5 3
3 Mrs. Jusna Ara Kashem Member 5 -
4 Mrs. Rehana Rahman Member 5 2
5 Mrs. Sirat Monira Member 5 4
6 Dr. Zaidi Sattar
(Independent Director)
Member 5 2
On invitation, Senior Executives of the Bank including the Managing Director, Chief
Financial Officer (CFO), Head of Internal Control and Compliance and Head of
Bank’s Risk Management Division attended the meetings to meet instant queries of
the Audit Committee to make its decisions fact-based.7
Terms of Reference of the Audit Committee
i. Mr. A.H.M. Moazzem Hossain, in his capacity as the Independent Director,
shall be the Chairman of the Audit Committee.
ii. Presence of 03 (three) members shall form quorum.
iii. The tenure of office of the Audit Committee shall be for 3 years.
iv. The Company Secretary shall act as Secretary to the Audit Committee.
v. The terms of reference of the Audit Committee shall also be as specified in
the BRPD Circular No.11 dated October 27, 2013 of Bangladesh Bank and
provisions contained in Notification No.SEC/CMRRCD/2006-158/134/Admin 144
dated 07 August, 2012 of Bangladesh Securities and Exchange Commission
(BSEC).
vi. Mr. Zakir Ahmed Khan, Advisor of the Bank, shall remain present in every
meeting of the Audit Committee as far as possible and shall give his advice and
suggestions for improvement of Bank’s operations and strict compliance of rules of
both the Bank and its regulators.

57 | P a g e
Charter of the Audit Committee
The Audit Committee is constituted by the Board of Directors for the primary purpose
of assisting the Board in :
 Overseeing the integrity of the company’s financial statement.
 Overseeing the improvement of corporate governance standard of the
company.
 Overseeing the Company’s system of disclosure, internal controls and
procedure.
 Overseeing Bank’s internal control over financial reporting.
 Overseeing Bank’s compliance with ethical standards adopted by the
company.
 Making reports and recommendations to the Board.
Roles and Responsibilities
The role of Audit Committee is to assist the Board in discharging its duties and
responsibilities for financial reporting, corporate governance, internal control, green
banking and environmental and climate change risks. The added roles of the Audit
Committee include, but not limited to, the following:
i) Overseeing the financial reporting process.
ii) Monitoring choice of accounting policies and principles.
iii) Monitoring Internal Control Risk management process.
iv) Overseeing hiring and performance of external auditors.
v) Reviewing the annual financial statements before submission to the Board
for approval.
vi) Reviewing the quarterly and half yearly financial statements before
submission to the Board for approval.
vii) Reviewing the adequacy of internal audit functions.
viii) Reviewing statement of significant party transactions submitted by the
management.
ix) Reviewing Management Letters/ Letter of Internal Control Weakness
issued by Statutory Auditors.
x) Reviewing the raising of fund through Repeat Public Offering/ Rights Issue
and its use and application.
xi) Monitoring internal control process.

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