Dhaka: In a major regulatory shift aimed at restoring governance and financial discipline, Bangladesh Bank (BB) has introduced a comprehensive 100-mark evaluation framework to assess the performance of Managing Directors (MDs) and Chief Executive Officers (CEOs) in all scheduled banks.
According to United News of Bangladesh, the newly issued "Key Performance Indicators (KPIs) Framework," announced by the Banking Regulation and Policy Department (BRPD), outlines that bank MDs will be judged across five crucial categories totaling 100 marks. This framework is designed to ensure a thorough evaluation of various aspects of bank management.
The 100-Mark Evaluation Breakdown focuses on key areas such as Bank Solvency and Liquidity Lens, which accounts for 25 marks and evaluates capital strength through measures like Capital to Risk-Weighted Assets Ratio (CRAR) and liquidity shock buffers. Asset Quality Lens, also with 25 marks, concentrates on reducing non-performing loans (NPLs) and managing stressed assets.
Governance and Internal Control Lens, another 25-mark category, assesses compliance with central bank directives, AML/CFT compliance, and ICT security, among others. Inclusion, Customer and Market Conduct Lens measures progress in financial inclusion and digital banking with a total of 15 marks. Lastly, the Profitability Lens evaluates financial metrics such as Return on Assets (ROA) and net interest margins, accounting for 10 marks.
The scoring system classifies MDs' performance as 'Above Average' for scores of 75 or above, 'Average' for scores between 65 to below 75, and 'Below Average' for scores below 65, which will necessitate immediate improvement. Each bank's Board of Directors is tasked with setting targets and computing scores, subject to approval and review by Bangladesh Bank.
MDs who fail to meet at least 50 percent of targets in critical sub-indicators, including gross NPLs and credit outreach, will face severe penalty deductions from their overall score. A specific KPI performance below 50 percent will result in zero marks for that component.
Banks' Boards are required to establish 3-year rolling targets and submit both annual and semi-annual review reports to Bangladesh Bank. The final evaluation score will have significant implications, directly influencing the tenure extension, reappointment, and compensation packages of bank MDs.