Brief History: Dutch-Bangla Bank happens to be Bangladesh's first joint venture bank.

The bank was a joint effort by local shareholders spearheaded by M Sahabuddin Ahmed (founder chairman) and the Dutch company FMO. From the beginning, the focus of this bank has been financing high-growth manufacturing industries in Bangladesh. The rationale being that the manufacturing sector exports Bangladeshi products worldwide, thereby financing and concentrating on this sector allows Bangladesh to achieve the desired growth. DBBL's other focus is Corporate Social Responsibility (CSR). Even though CSR is now a clich, DBBL is the pioneer in this sector and termed the contribution simply as 'social responsibility'. Due to its investment in this sector, DBBL has become one of the largest bank donors in Bangladesh. The bank has won numerous international awards because of its unique approach as a socially conscious bank. DBBL was also the first bank in Bangladesh to be fully automated. The Electronic-Banking Division was established in 2002 to undertake rapid automation and bring modern banking services into this field. Full automation was completed in 2003 and as a result it was able to introduce plastic money to the Bangladeshi people. DBBL also operates the nation's largest ATM fleet and in the process drastically cut consumer costs and fees by 80%. Moreover, DBBLs choice of the low profitability route for this sector has surprised many critics. DBBL had pursued the mass automation in Banking as a CSR activity and never intended profitability from this sector. As a result, it now provides unrivaled banking technology to all its customers. Because of this mindset, most local banks have joined DBBL's banking infrastructure instead of pursuing their own. Even with a history of hefty technological investments and an even larger donation, consumer and investor confidence has never waned. Dutch-Bangla Bank stock set the record for the highest share price in the Dhaka Stock Exchange in 2008.

1|Page

Vision: Dutch-Bangla Bank dreams of a better Bangladesh, where arts and letters, sports and athletics, music and entertainment, science and education, health and hygiene, clean and pollution free environment and above all a society based on morality and ethics make every Bangladeshis life worth living. DBBLs essence and ethos rest on a cosmos of creativity and the marvel-magic of a charmed life that abounds with spirit of life and adventures that contributes towards human development. Mission: Dutch-Bangla Bank engineers enterprise and creativity in business and industry with a commitment to social cause. Profits alone do not hold a central focus in the Banks operation; because it believes that man does not live by bread and butter alone. Core objective: Dutch-Bangla Bank believes in its uncompromising commitment to fulfill its customer needs and satisfaction and to become their first choice in banking. Taking cue from its pool of esteemed clientele, Dutch-Bangla Bank intends to pave the way for a new era in banking that upholds and epitomizes its motto "Your Trusted Partner.

2|Page

Corporate Governance issue of Dutch Bangla Bank Limited: Abstract: Dutch Bangla Bank is one of the leading banks in our country which is providing good services in the banking sector. DBBL was established under the Bank Companies Act 1991 and incorporated as a public limited company under the Companies Act 1994 in Bangladesh with the primary objective to carry on all kinds of banking business in Bangladesh. In June 1996, DBBL started its formal operation in the banking sector. Since its establishment, DBBL has been providing a large number of corporate banking services, Such as Project finance, Working Capital finance, Syndications & Structured finance, Trade finance, Equity finance Social and Environmental Infrastructure finance, Custom electronicbanking projects etc. I have tried to disclose information about the whole corporate banking system of DBBL and how its improving its corporate banking system with the help of Annual reports of the last five years of the Bank. Corporate banking variables such as Board size, Independent Non-executive Directors, Ownership Structure, Family Control and audit Committee have been discussed. Also I have tried to disclose the overall corporate banking tasks of Dutch Bangla Bank Limited.

3|Page

Introduction: Dutch Bangla Bank is one of the important financial institutions in the Bangladeshi economy. The economic development of a country depends on the development of banking sector. Today this bank is not only providing traditional banking services but also expanding many financial services. The demands of corporate governance require professionals to raise their competency and capability levels to meet the expectations in managing the enterprise and its resources effectively with the highest standards of ethics which is being practiced by the DBBL. The Bank has adequately complied with all the Corporate Governance Guidelines of Bangladesh Bank and Securities and Exchange Commission (SEC). It is ensured by the Board that all activities and transactions of the Bank are conducted in compliance with the best international practices to protect the highest interest of all the stakeholders. Maximizing value for shareholders through performance with good governance is the responsibility of corporate management. In line with the best practice, the corporate governance systems and practices in DBBL are designed to ensure adequate internal control in operational process, transparency and accountability in doing business; and proper and timely disclosures in financial reporting so that value is maximized for all the stakeholders.

CORPORATE GOVERNANCE: Corporate Governance has become an important issue in this region that provides a framework for internal control, thereby reducing agency problem. It is the system of internal controls and procedures used to define and protect the rights and responsibilities of various stakeholders. The Bank has adequately complied with all the Corporate Governance Guidelines of Bangladesh Bank and Bangladesh Securities and Exchange Commission (BSEC). It is ensured by the Board that all activities and transactions of the Bank are conducted in compliance with international best practices to protect the highest interest of all the stakeholders.

4|Page

Corporate Banking Activities: Project Finance: The Bank encourages accepting purpose/project specific development funds on competitive terms towards economic uplift and well being of the people/country by setting up a new stand alone, capital intensive project or for BMRE of an existing project. Working Capital finance: The bank considers lending short term working capital finance to entities engaged in manufacturing, assembling, processing, re-packaging of goods and commodities for domestic consumption or export market. However, unsecured loans (not collateralized) for working capital without justification or purpose is not considered. Syndications & Structured finance: The Bank, on case to case basis, arranges loan syndications or approves disclosed participations in syndications provided such transactions meet the parameters separately established. The bank will at all times maintain at the minimum a status to other banks in all lending relationships. Second mortgages or lower are not accepted as primary collateral. Trade finance: DBBL prefers Trade Financing in the form of short-term (up to 12 months), self liquidating or cash flow supported well collateralized trade transactions. The Bank will consider financing construction contractors (work order finance). However all such transactions must meet the guidelines. DBBL asks for assignment of bills receivables with concurrent authority to collect bills issued favoring DBBL. Equity finance:

DBBL join hands in building partnership with entrepreneurs of high credit standing and excellent
5|Page

track record within regulatory restrictions. However, lending for the purpose of supplying equity in a business is not allowed nor venture capital financing. Social and Environmental Infrastructure finance: The Bank receives credit lines, from time to time from home & abroad, to finance eco-efficient and sustainable projects aimed at improving environment and generating social benefits. Custom electronic-banking projects: If the client realizes that they need a specific banking solution and/or services to meet their needs, DBBL will create it and provide it. Projects are done on a per client basis designed specifically to meet the needs of clients. Currently large companies and Multi-nationals use these services extensively but it is not limited to them only. Board Size: Board size has many influences on directing the whole banking system of DBBL. Dutch-Bangla Bank started operation as Bangladesh's first joint venture bank. The bank was an effort by local shareholders spearheaded by M Sahabuddin Ahmed (founder chairman) and the Dutch company FMO .In 2009 there was only eight member of Board of Director .But in 2010 and 2011 there was seven member of Board of Director. Now member of the board of DBBL is eight and they are: Mr. Sayem Ahmed Mrs. Frey-Tang Yuen Mei, Barbara : Nominee of Ecotrim Hong Kong Limited Mr. Md. Fakhrul Islam : Elected from General Public Shareholders' Group Dr. Irshad Kamal Khan : Independent Director Dr. Syed Fakhrul Ameen : Director from the Depositors Mr. Chowdhury M. Ashraf Hossain : Director from the Depositors Mr. Md. Yeasin Ali : Independent Director Mr. K. Shamshi Tabrez : Ex-officio Director (Managing Director)

6|Page

The board formulates the policies and strategies of the bank that are to be followed by the managers. If there is greater number of directors of the board, it might create some problem because of their decision rule which would be taken by the board members. That is why sometimes board size of DBBL has been reduced and also has been increased. Independent Non-executive Directors: DBBL has one independent director in the Board of the Bank. In compliance with corporate governance guidelines of SEC, Dr. Irshad Kamal Khan was appointed as an independent director. The Board critically evaluates strategic direction of the Company, management policies and their effectiveness.

Depositor Directors: DBBL has two depositor directors in the Board of the Bank. In compliance with corporate governance guidelines of Bangladesh Bank, Dr. Syed Fakhrul Ameen and Mr. Chowdhury M. Ashraf Hossain were appointed as Directors representing depositors of the Bank. Mr. Ameen is a Professor of Department of Civil Engineering in Bangladesh University of Engineering and Technology (BUET) and Mr. Hossian is a businessman having a Masters Degree in Journalism.

Ownership Structure: Founder, Dutch-Bangla Bank & Chairman, Dutch-Bangla Bank Foundation Mr. M. Sahabuddin Ahmed Family Control: DBBL is not a family controlled organization. Audit Committee: Member of Audit Committee: Mr. Md. Yeasin Ali : Chairman Mr. Abedur Rashid Khan : Member Mr. Sayem Ahmed : Member Dr. Irshad Kamal Khan : Member

7|Page

The objectives of the Audit Committee are to assist the Board of Directors mainly in the following areas: Establishing a culture of adequate internal control system to ensure that sufficient risk management system is in place to manage core risks of the Bank and that financial reports disclosed by the bank are reliable. Developing an adequate Information Technology (IT) and MIS and establishing sufficient control system in IT operations to protect the Bank against any operational risk. Ensuring true and fair presentation of financial statements in compliance with Bangladesh Accounting Standards/Bangladesh Financial Reporting Standards and applicable regulatory requirements. Reviewing the internal audit procedure of the Bank to ensure that the internal audit can pursue their activities without any hindrance. Reviewing the adequacy and effectiveness of internal audit and also reviewing whether management is complying with recommendations made by the internal audit. Recommending appointment of external auditors and special auditors and also reviewing audit works and reports submitted by external auditors and special auditors to ensure compliance and regularization of recommendations made by the auditors. Reporting to the Board of Directors on mistakes, frauds and forgeries and other irregularities for guidelines. Ensuring compliance to all applicable legal and regulatory rules and regulations and the directives made by the Board of Directors of the Bank.

The Committee is also instructed for immediate compliance of all issues raised and stressed the need for compliance on the part of Head of all Branches to review the progress on a regular basis and to submit updated compliance reports to Internal Control and Compliance Division.

8|Page

The Committee put special emphasis on the following areas: To comply with all the requirements of the regulatory circulars meticulously provided by the regulatory Authority like Bangladesh Bank, Securities and Exchange Commission (SEC) etc. To give emphasis on the Retail and SME business in the branches. To give emphasis on improving the customer service. To complete all documentation formalities in the loan accounts, if any. To improve the deposit mixes with a view to bring down the cost of fund. To establish a Reconciliation Cell. To maintain Departmental Control Functions Check List (DCFCL) as per regulatory guidelines. To give emphasis on account opening. To take necessary actions for delivery of ATM cards. The Committee also reviewed the Banks audited financial statements as of 31 December 2008 and half-yearly financial statements as of 30 June, 2009 audited by M/s. Hoda Vasi Chowdhury & Co. While reviewing financial statements, the Committee thoroughly reviewed adequacy of provisions made against loans and advances and other assets and capital adequacy ratio. The Committee stressed the need for close coordination between external auditors and Internal Control and Compliance Division for continuous improvement of internal control procedure and risk management system of the Bank.

9|Page

Recommendation: The bank should hire experts who can understand the future economic situation and can take initiative based on the forecast. Again the bank can achieve success from the economy if they can handle the situation efficiently. The Bank should improve their research centre and training centre to enrich the knowledge regarding Uniform Customs and Practice for Documentary Credit (UCPDC). It should improve its management of international division who are responsible for handling their foreign exchange related risk. Also it should maintain relationship with the bank that will help them to settle payment and receipt involving foreign exchange transaction. The bank should be aware about their customers to meet up their demand in order to maintain their goodwill. Bangladesh is a developing country. Many people of our country live in foreign countries. So, it is important to maintain foreign exchange department in every bank division. Foreign exchange department of DBBL should enrich itself by acquiring new technology to create a good and healthy competition among the banks.

10 | P a g e

Conclusion: Dutch-Bangla Bank Limited is one of the most potential Banks in the Bangladeshi banking sector. It has a large portfolio with huge assets to meet up its liabilities and management of this bank is equipped with expert bankers and managers in all levels. So, it isnt an easy job to find out the drawbacks of this bank. I would rather make my own opinion about the ongoing practices in DBBL. Over the last few decades there has been dramatic transformation in the realm of foreign exchange and financing of foreign trade. In the wake of these changes the financial experts have developed a whole range of ideas and techniques regarding management exchange rates, investment of foreign exchange reserve and opening up the economy. Currently this sector is becoming extremely competitive with arrival of multinational banks as well as technology infrastructure, effective foreign trade management, higher performance level and customers satisfaction. Again the rise of a new era of information technology has changed the ways banks handle their foreign exchange related transactions. We know that institutional support is necessary for undertaking international trade and foreign exchange business. On the other hand expertise regarding management of exchange rate is essential for successful operation of foreign exchange related transactions. By undertaking these activities efficiently, DBBL will be able to maximize their profit and achieve their wealth maximization objectives. DBBL undertake and support foreign exchange business and management of exchange rate in different ways. But some improvement regarding exchange rate risk minimization is needed for handling the competition that arise from competitive financial market, as the foreign exchange division has an influential effect on the net operating income and net income of the bank. Recently this division was successful in acquiring permission to perform most of the foreign exchange related transactions. But rivalry amongst local and foreign banks will make the activities of the bank more competitive in the near future. So the bank should undertake the foreign exchange transactions in a more innovative way. So Dutch- Bangla Bank Limited has to reengineer its plan and reform the service improvement strategy to retain the higher performance level, customer satisfaction and to face off challenges.

11 | P a g e

Bibliography:

1. 2. 3.

Annual Report of Dutch- Bangla Bank Limited 2008, 2009,2010,2011,2012. www.dbbl.com.bd www.bangladesh-bank.org

12 | P a g e