Dhaka: Bangladesh Bank (BB) has issued a directive prohibiting commercial banks with capital or provision shortfalls from disbursing incentive or performance bonuses to their employees. The directive aims to ensure that banks maintain financial stability and adhere to prudent banking practices.
According to Bangladesh Sangbad Sangstha, BB released a circular today addressed to the managing directors and chief executives of all banks, detailing these new regulations. Previously, banks were allowed to distribute bonuses even when they faced financial deficits. However, the new rules mandate that incentive bonuses can only be disbursed from profits earned based on the current year’s actual income and expenses, explicitly prohibiting the use of retained earnings for this purpose.
The central bank’s move is part of a broader effort to strengthen the financial health of commercial banks and prevent risky financial practices that could endanger the banking sector’s stability. By enforcing this regulation, BB aims to ensure that banks prioritize addressing capital shortfalls and provision deficits over employee bonuses, thereby promoting responsible financial management.