ET Report
Finance minister Abul Maal Abdul Muhith Tuesday placed two separate bills before the parliament (Jatiya Sangsad) to amend Bank Company Act, 1991 and Financial Institution Act, 1993 with the objective of reducing 'related party transaction' and 'conflict of interests'.
The Bank Company (Amendment) Bill 2010 debars a director of a bank company from becoming a director of another bank or any other financial institution or an insurance company.
The Financial Institution (Amendment) Bill 2010, similarly, makes a director of a financial institution ineligible to become a director of any other financial institution or a bank or an insurance company.
Both the bills were sent to parliamentary standing committee on finance for further scrutiny.
Mr Muhith said functions of a bank, financial institution (FI) and insurance company are interrelated and if a person becomes director of all the three, there is a possibility of 'related party transaction'.
"If a person becomes director of a bank company, a financial institution and an insurance company simultaneously, there is always a fear of 'related party transaction' and conflict of interest," he said.
The minister said clause 75 of the recently enacted Insurance Act, 2010 is in conflict with the clause 23(1)(ka) of Bank Company Act, 1991 and clause 25(3) of Financial Institution Act, 1993.
The insurance act stipulates that a director of an insurance company cannot be a director of any other insurance company, bank company or financial institution but the Bank Company Act, 1991 and the Financial Institution Act, 1993 allow their directors to become directors of insurance company, bank company or financial institution.
"It is logical that a director of an insurance company should not be a director of any other insurance company, bank company or financial institution," he said.
The amendments to the Bank Company Act, 1991 and the Financial Institution Act, 1993 have proposed to make the acts in line with the Insurance Act, 2010, he added.
After the incorporation of the amendments into the acts concerned, wealth would not be concentrated in the hand of a few and it would help bring dynamism in the economy, Mr Muhith hoped.