[Cross posted at E-Bangladesh]
The head of Bangladesh’s military government, General Moeen U Ahmed, is coming to America. He is accompanied by the Air force chief Air Marshal S M Ziaur Rahman and by the other man instrumental in the January coup, Lt. General Masududdin Chowdhury. Last week Bangladesh’s Navy chief was also visiting the United States. It seems like the entire ruling junta is coming to America.
General Moeen, for his part, will be visiting Harvard University on October 21st. I am told that the General wanted to speak at the Kennedy School of Government (KSG) but wanted to restrict questions. Harvard refused. So, instead, the General will be speaking to a class rather than in a KSG sponsored public event.
On his way to America General Moeen stopped over in London, where he also had a chat with Britain’s Chief of the General Staff. In London, he once again dismissed persistent rumors that he wants to become President of Bangladesh. He also spoke out strongly in defense of the military’s "anti-corruption" drive:
In reply to a question, the army chief said those arrested and jailed were "corrupt". Throwing a challenge, he posed a question: "Can anyone find any honest person among those arrested and jailed?"
Indeed this "anti-corruption" drive has resulted in the jailing of most of Bangladesh’s top political leaders. Some notable convictions of politicians were 13 years imprisonment for incorrectly stating one’s net worth in the so-called "wealth statements" and 5 years imprisonment for having 21 bottles of alcohol in one’s home. In addition, two former Prime ministers, and leaders of the two leading political parties, are being held without bail on corruption charges.
General Moeen’s army has gotten tough on the politicians "in the nation’s forward march." The age of honestocracy is upon Bangladesh.
So it comes as a surprise to learn that General Moeen and his brother Iqbal U Ahmed are Chairman of the board of directors and Managing Director, respectively, of the same bank in Bangladesh – The Trust Bank. Ltd. The Trust Bank recently IPOed and its stock skyrocketed on its first day of trading on the Dhaka Stock Exchange, setting a new record for volume traded in a single day. Before the IPO, the owner of Trust Bank was the Army Welfare Trust. As such, the army chief, General Moeen, was appointed the Chairman of the board of directors. However, having two members of the same family on the same board of directors apparently violates the Bangladesh Bank regulations governing the constitution of the board of directors of a bank:
1. Constitution of the Board of Directors:-
a) The board of directors of the bank-companies shall be constituted of maximum 13 (thirteen) directors. However, the directors of the banks, where the number of directors is more than this number, shall be allowed to complete their present tenure of office.
b) This restriction shall apply to appointment/reappointment of the directors against retirement or filling casual vacancy subject to section 15 Ka Ka of the Bank Companies Act, 1991. -Not more than one member of a family will become director of a bank. For this purpose family members shall include spouse, parents, children, brothers and sisters of the director and other persons dependent on him/her. [Emphasis added]
One of the responsibilities of the Chairman and the board of directors is to appoint the Managing Director of the bank. Having family members on the same board of directors can lead to conflict of interest and nepotism. In November 2006 General Moeen was the Chairman of the board of directors when his brother was reappointed Managing Director of Trust Bank.
Not only are General Moeen and his brother, Iqbal, on Trust Bank’s board of directors, they are also borrowers of large sums of money from the bank. According to a prospectus filed by Trust Bank before its IPO, General Moeen had a loan with an outstanding balance of Tk. 9,969,215 at the end of 2005. By the end of 2006, the outstanding amount had been reduced to Tk. 3,315,323. His brother, the Managing Director, had an outstanding loan balance of Tk. 1,775,242 at the end of June 2006. At the end of 2005 General Moeen’s loan amount was by far the largest loan given to any director or senior executive of Trust Bank.
Bangladesh Bank regulations restrict lending to directors of banks. The regulations state:
1. Any loan facility or guarantee or security provided to a Director of a bank or to his relatives must be sanctioned by the Board of Directors of the bank and approved in the general meeting and has to be specifically mentioned in the Balance sheet of the bank. However the total amount of the loan facilities extendable to a Director or to his relatives should not exceed 50% of the paid-up value of the shares of that bank held in Director’s own name. [Emphasis added by me.]
The ownership of Trust Bank, before the IPO, consisted of 7,000,000 shares, with 6,999,920 shares held by Army Welfare Trust. Of the remaining shares, General Moeen owned 10 shares. His brother, Iqbal, owned no shares. Each share was valued at Tk. 100. Therefore General Moeen owned Tk. 1000 worth of shares. According to Bangladesh Bank regulations he was entitled, with the approval of the board of directors, to get a loan for an amount up to Tk. 500. In other words, at the end of 2005 General Moeen had a loan Tk. 9,968,715 in excess of the amount allowed by the law.
The reason the Bangladesh Bank regulations are in place is to guard against abuse of power by directors of private banks – that is to say, to prevent corruption.
It appears, from looking at the available public information on Trust Bank and its loans to its directors, that the loan to General Moeen exceeds that which is allowable by the law. In an environment where the Bangladesh military has been jailing politicians for failing to accurately recount from memory their net worth, it is extremely important that the man in charge of the military clear up any confusion arising from his tenure as the Chairman of Trust Bank.