A Report On Corporate Governance Practices in Prime Bank Limited

1.1              Introduction

Prime Bank Limited is a private commercial bank i. It was established on April 17, 1995. It is now one of the banks in Bangladesh which follows international standards in Banking and Finance. Prime Bank was created and commencement of business started on 17 April 1995. The sponsors are reputed personalities in the field of trade and commerce and their stake ranges from shipping to textile and finance to energy etc. Prime Bank offers all kinds of Commercial Corporate and Personal Banking services covering all segments of society. Diversification of products and services include Corporate Banking, Retail Banking and Consumer Banking right from industry to agriculture, and real estate to software. Prime Bank has been launched by a group of successful entrepreneurs with recognized standing in the society. The management of the Bank consists of a team led by senior bankers with decades of experience in national and international markets. The senior management team is ably supported by a group of professionals many of whom have exposure in the international market. 

The asset and liability growth has been remarkable. Prime Bank has been actively participating in the local money market as well as foreign currency market without exposing the Bank to vulnerable positions. The Bank's investment in Treasury Bills and other securities went up noticeably opening up opportunities for enhancing income in the context of a regime of gradual interest rate decline. 

Prime Bank Limited started its service with a vision to serve people with modern and innovative banking products and services at affordable charge. Being parallel to the cutting edge technology the Bank is offering online banking with added delivery channels like ATM, Tele-banking, SMS and Net Banking. And as part of the bank's commitment to provide all modern and value added banking service in keeping with the very best standard in a globalize world.

1.2 Corporate Milestones

1.3 Pay-off line / Slogan

Sailing THROUGH SUCCESS

1.4  Vision

To be the best Private Commercial Bank in Bangladesh in terms of efficiency, capital adequacy, asset quality, sound management and profitability having strong liquidity.

1.5 Mission

·         To build Prime Bank Limited into an efficient, market driven, customer focused institution with good corporate governance structure.

·         To set high standards of integrity and bring total satisfaction to our clients, shareholders and employees.

1.6 Goals

The Goals that Prime Bank Limited pursued in order to ensure the achievement of its vision and mission are as follows.

1.6.1        Sustainable growth

Synergies between new knowledge and human capital for sustainable economic growth.

1.6.2        Capital stewardship

Preservation and enlargement of multiple forms of capital; like intellectual, natural, financial, organizational, social; all of which contribute to long term value creation

1.6.3        Accelerating financial inclusion

Accelerate progress towards financial inclusion with technology like ATM,  mobile phone, smart card based banking services and renewable energy generation projects especially in rural areas.

1.6.4        Differentiating Value Added Services

Strong focus on extremely cost-efficient and green services through Internet banking, electronic fund transfer, automated cheque clearing,  e-bank statement, SMS alert etc.

1.6.5        Green Banking

Quantification of in-house facilities and energy consumption to promote paperless office and enhance energy efficiency. Greater emphasis on green banking projects.

1.6.6        Leader in business

Create new dimension in the syndication and structured financing. Grow with export. Well diversified portfolio

1.7 Product and service offered

1.7.1. Deposit Accounts:

Prime Bank offer a wide range of deposit accounts catering to the customers different needs which include-

1. Saving Account
2. Current Account
3. Fixed term deposit
4. Prime Bank  Shanchaye plus
5. Prime Bank  Deposit Pension Scheme (DPS)
6. Prime Bank  Monthly Benefit Plus
7. Prime Bank  Triple Benefit Plus
8. Prime Bank  shanchaye koti poti
9. Short term deposit

1.7.2. Consumer finance:

1. Auto Loan
2. House Finance
3. Senior Citizen Support
4. Unsecured Personal Loan
5. Consumer Durable Loan
6. Loan for Professionals

1.7.3. Islamic Banking

1.7.3.1 Deposit Products

•     Al-Wadiah Current Account (AWCA)

•     Mudaraba Savings Account (MSA)

•     Mudaraba Special Notice Deposit Account (MSNDA)

•     Mudaraba Term Deposit Account (MTDA) of different

Tenure

•     Mudaraba Hajj Savings Scheme (MHSS)

•     Mudaraba Deposit Pension Scheme (MDPS)

•     Mudaraba Monthly Profit Paying Deposit Scheme

(MMPPDS)

•     Smart Junior Saver (SJS)

1.7.3.2. Investment Products

•     Bai Murabaha Muajjal

•     Hire Purchase Shirkatul Melk (HPSM)

•     Musharaka

•     Quard against Accepted Bills

1.7.4. Credit Card

                  •           MasterCard Local Credit Card

                  •           VISA Dual Currency Credit Card

                  •           VISA Local Credit Card

                  •           VISA Butterfly Credit Card

                  •           VISA Mini Credit Card

                  •           VISA International Card against RFCD, RQ A/C

                  •           Virtual Card

                  •           SME Credit Card

                  •           NBFI Card Cheque

                  •           International Prepaid Hajj Card

1.7.5. Treasury

·         Money Market

                  •           Overnight Call

                  •           Repo and Reverse Repo

                  •           Swap

                  •           Sale and Purchase of Treasury Bill & Bond

                  •           Term Placement

                  •           Term Borrowing

1.7.6. Foreign Exchange Market

                  •           Spot

                  •           Forward

                  •           Interbank Buy / Sale

1.7.7. Service Products

                  •           ATM Services

                  •           Remittance Service

                  •           Locker Service

                  •           Online Banking

                  •           Internet Banking

                  •           Phone Banking

                  •           Mobile Banking

                  •           Remote Banking (EBEK)

                  •           SWIFT

                  •           Centralized Trade Services

                  •           Student File

                  •           Travelers’ Cheque

1.7.8. Off-shore Banking Unit (OBU) Products

                  •           On-shore Bill Discounting through OBU

                  •           Bill Discounting

                  •           Capital Finance

                  •           Working Capital Finance

                  •           Trade Finance

                  •           On-shore Export Bill Discounting

1.7.9. Capital Market Operation

                  •           Brokerage Operation

                  •           Margin Loan

2.1 Corporate Governance

Corporate governance is a concept referring to the ideal mode of ensuring firm’s accountability to its various stakeholders through a strict system of internal controls and procedures. Since the responsibility of maintaining a good corporate governance system lies on the board of directors, Board of Directors of Prime Bank always keeps line with the related rules & regulations of various regulatory bodies. The corporate governance of Prime Bank is of superior quality placing the fairness, transparency, accountability and responsibility on its top most priority. Our disclosures on status of compliance on BSEC and Bangladesh Bank guidelines demonstrate strong compliance culture of the Bank. The details of corporate governance practice of Prime Bank are discussed in a separate segment.

Corporate governance is the set of processes, customs, policies,  laws, and institutions affecting the way an organization (or company) is directed and administered. Corporate Governance also includes relationships among the stakeholders involved and achievement of the goals for which the organization is formed. The principal stakeholders of a bank are depositors, shareholders, board, management, employees and borrowers. Other stakeholders include suppliers, regulators, other banks, and the community at large. Corporate governance is the acceptance by management of the inalienable rights of shareholders as the true owners of the company and of their own role as trustees on behalf of the shareholders. It is about commitment to values, about ethical business conduct and about making a distinction between personal & corporate funds in the management of a company.  Fairness, Transparency, Accountability and Responsibility are the minimum standards of acceptable corporate behavior.

Corporate governance is also to ensure the accountability of certain individuals in an organization through mechanisms that try to reduce or eliminate the principal-agent conflict. A related discussion of corporate governance focuses the system of economic efficiency with a strong emphasis on enhancement of shareholders' value and welfare.

Since its founding, Prime Bank has actively been adhered to the principles of sound corporate governance. In Prime Bank , corporate governance means increasing the stakeholders’ value by being efficient & professional to the organization, transparent and accountable to the shareholders and responsible to the society and the environment. The Board of Directors plays a key role in corporate governance. It is their responsibility to endorse the organization’s strategy, develop directional policy, appoint and supervise senior executives and to ensure accountability of the organization to its owners and regulatory authorities.

Prime Bank’s corporate governance structure encompasses the following elements:

Board size

Ownership Structure

Family Control

Audit Committee

Independent

Non-executive Director

2.2 Board size

The number of member in the Board of Prime Bank is 19 as per the Bangladesh Bank’s guideline. Out of the 19 members three members are the Independent Director. Thus, the bank also complied with the Securities and Exchange Commission’s corporate governance guidelines. Board members include persons of high caliber, with academic and professional qualification in the field of banking industry and other businesses. This gives the members of the Board the strength for effective discharge of duties and responsibilities. The Board approves the bank’s policies; budget and business plan; and reviews those on different intervals so as to give directions as per changing economic and market environment. The Board also reviews the policies an manuals of the various segments of businesses in order t establish effective risk management in credit and other key area of operations. For effective supervision the Board formed two committees wit its members as per guidelines of Bangladesh Bank. The committees are Executive Committee and Audit Committee.

It seems from last five year that there is no big change in board of directors. Compare to 2008 with 2009,there are some new member added and some of member are not exists in Directors who was BOD in 2008. There is an alternative Director (Mr. Md. Shirazul Islam) was added instead of Nafiz Shiqdar. It seems that form 2010, there are some changes.

We observed that the size of BOD is same for last 5 (five ) years. The persons are changed but the number of member remains same. The BOD of Prime Bank is very strong and effective in running their business. As I observed their financial record for last 5 years, it shows their efficiency and capability.

A well structured BOD is the key to success in business and specially banking sector it is very important. Because forecasting is very important for this business and good and capable BOD can make the right decision in this case.

In the following page, there are shown the BOD of Prime Bank.

2.3 Independent non-executive Director

As part of good governance in the organization appointment of independent director is considered as an important instrument.  Independent directors in the Board exert an independent view on the policies and decisions of the Board and ensure that the policies and decisions are for the best interest of the whole bank. Prime Bank has appointed three independent directors in the Board. They are “Md. Maolana Mohammad Salauddin” and renowned advisor Mr. Ziaur Hasan Shiddik

2.4 Ownership Structure

Prime Bank Limited is one of the third generation private commercial banks (PCBs), incorporated in Bangladesh in 1995 as a Public Limited Company under the Companies Act 1994, and governed by the Banking Companies Act 1991. The Bank went for public issue of its share in 1999 and its shares are listed with Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited. No significant changes have been taken place during the reporting period regarding size, structure, ownership of Prime Bank.

Table:  Share holding Structure

2.5 Family Control

Family control is very common in those firm or organizations where the most of the share holder are from same family. They got the power to influence the decision and can also have the power to change the system and structure.

In Prime Bank we observed that once there was family in BOD but later on they are not seen in BOD. As per we study, we didn’t find anything that influence the decision of BOD or other sector.

2.6 Audit Committee

The Board of Prime Bank constituted the Audit Committee in January 2003 with the objectives of establishing a structure of a complied and secured banking. The Committee takes up responsibilities to supervise the management and control of various risk factors coming up from banking operation, to strengthen the internal control system and to act as a connecting force between internal and external auditors in order to bring a disciplined banking operation. The Committee reviews the financial reporting process, the system of internal control and management, the audit process, compliance with laws and regulations, and its own code of business conduct.

The Audit Committee also examines the status of implementation of Bangladesh Bank guidelines and bank’s own policies and manuals. The Audit Cell of the Board and the Internal Audit team of the bank undertake various special audits as per advice of the Audit Committee. Audit Committee meets with the external auditors to discuss audit plan, the risk management processes and preparation of the financial statements as per BAS and IAS.

The presence of an audit committee significantly influences the magnitude of corporate disclosure. The composition of audit committees with insiders and outsiders is also an important factor in examining the level of disclosure. Since 2008, the audit committee of Prime Bank kept vital role in order to make the financial report correct and disclose in front of BOD.

The structure of Board’s Audit committee as follows

Summary

To bring superior quality of service in present banking sector, a group of esteemed entrepreneurs led by the current chairman Md. Shirazul Islam Mollah, came up with the dream idea of a bank that would be fully customer focused, technology driven & will ensure excellence in execution in every sphere of banking. Their brain child came to life as Prime Bank was born in February 2^nd 1995, with the aim of contributing for the development of the economy. Now so many things have changed & so many milestones have been achieved in this long 18 years but Prime Bank has always been truthful to its mission of being the technology driven innovative bank of Bangladesh.  Prime Bank has associated Islamic Banking, Off-shore Banking, brokerage services, SME financing & many more specialized services with its core banking activities. To excel in this new era of technologies triumph, Prime Bank has successfully introduced mobile banking, cutting edge ICT, state of the art network solution, 24/7 ATM service & many other e-products. To make the bank sustainable, keep the performance consistent & overall improvement in each side, Prime Bank follows some focused strategic issues in a Quantitative & Qualitative measures. It maintains strong corporate governance that helps to give an excellent brand image through financial performance & other issues. It is importance to focus that the Prime Bank Limited’s Corporate Governance is pretty much good enough and it helps to led the company staff to do the right things and get better output and get a strong position over competitor.

Recommendation

Prime Bank limited is one of the top ranked banking organizations in Bangladesh. They have skilled and dedicated people who are always try to develop their services and make a better position in competition.  After reading the 5 years financial Report, I personally think Prime Bank is doing best. But they have the capability to maintain the present’s condition.

I am suggesting for Prime Bank as,

Ø  To reach root level people with new and innovative concept

Ø  Make more effective deposit plan

Ø  Give more emphasize on general share holder

Ø  Make more clear Corporate Governance to the all share holder

Conclusion

It has established an appropriate and effective internal control environment to ensure that the Bank is managed and controlled in a sound and prudent manner. Prime Bank’s corporate governance system requires its work force to be accountable, transparent and ethically sound. The Bank always maintain transparency in disclosures and as recognition Prime Bank was awarded several times for best published accounts and corporate governance disclosures.

References:

1. Annual Report of Prime Bank limited 2012
2. Annual Report of Prime Bank limited 2011
3. Annual Report of Prime Bank limited 2010
4. Annual Report of Prime Bank limited 2009
5. Annual Report of Prime Bank limited 2008