Term Paper On Corporate governance practices in commercial bank A case study on Dutch Bangla Bank Ltd.

Term Paper On Corporate governance practices in commercial bank A case study on Dutch Bangla Bank Ltd.

(This term paper Is Submitted For the Partial Fulfillment of the Degree of Bachelor of Business of Administration with a Major in Accounting

Submitted To
Mrs Fatema Johara
Lecturer Premier University Faculty of Business Administration Department of Accountin

Submitted By
!ame" Mohammad Toslim #tudent $D" %&1&11'%() #emester" 1&th Pro ram" BBA Ma*or in Accountin +
#u,mission Date" 1-th March./%1)

Letter of Submission
Date" 1th

March. /%1)

To The #upervisor

Mrs Fatema Johara

Lecturer Premier University Faculty of Business Administration Department of Accountin
#u,*ect" #u,mission of term paper on 01orporate overnance practices in commercial ,an2 A case study on Dutch Ban la Ban2 Ltd+ Dear #ir $t is my pleasure to su,mit my term paper on Corporate governance practices in commercial bank, A case study on Dutch Bangla Bank Ltd. Thou h it3s a ne4 e5perience for me. $ tried my ,est to ather relevant information for preparin a complete paper on this su,*ect+ 6ithout the sincere co7operation and proper uidance of you. it 4as not possi,le for me to prepare the report+ For this act of 2indness $ am rateful to you+ This paper is not totally free from mista2e due to some unavoida,le limitations+ $ hope you accept it 4ith racious consideration+ Than2in 8ou+ #incerely 8ours 777777777777777777777777777777777777777777

!ame" Mohammad Toslim #tudent $D" %&1&11'%() #emester" 1&th Pro ram" BBA Ma*or in Accountin +

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Acknowledgement

First of all. $ 4ould li2e to e5press my deepest ratitude and hum,le su,mission to the Almi hty Allah 4ho has iven me the stren th and opportunity to complete a hu e tas2 of preparin this internship report 4ith in the scheduled time+ $ 4ould also li2e to e5press my heartiest ratitude to my honora,le teacher Mrs Fatema Johara. lecturer Faculty of Business #tudies. Premier University 1hitta on . Ban ladesh 4ho uides me a lot to prepare this report+ $ also 4ant to than2s the officials of Dutch Ban la Ban2 limited Ban ladesh+ Last ,ut not the least. my family and my friends 4ho have ,een helpful ,y ivin me their co7operation and efforts in completin this report+

able o! Contents
" $ % & '
"+ itle #age,

itle #age Cover #age Letter o! ransmittal Acknowledgement ()ecutive *ummary

i ii iii iv v "

Chapter -ne +.ntroductory Aspects,

Background -b/ectives o! the study 1ethodology
Limitations o! the report

$ $0% % % & '0"2

"3

Chapter wo heoretical aspects

Company Details

Chapter hree #ractical Aspects #ractical Aspects Chapter 6our Conclusionary Aspects
8ecommendation 8e!erence Conclusion A##(9D.:

"40$5 %7 %"0%$ %% %& %'0%2

()ecutive *ummary

Corporate governance is about commitment to values and ethical business conduct. It is about how an organization is managed. This includes its corporate and other structures, its culture, policies and the manner in which it deals with various stakeholders. Accordingly, timely and accurate disclosure of information regarding the financial situation, performance, ownership and governance of the company is an important part of corporate governance. This improves public understanding of the structure, activities and policies of the organization. Consequently, the organization is able to attract investors, and enhance the trust and confidence of the stakeholders. Corporate governance philosophy is based on the following principles !atisfy the spirit of the law and not "ust the letter of the law. Corporate governance standards should go beyond the law #e transparent and maintain a high degree of disclosure levels. $hen in doubt, disclose %ake a clear distinction between personal conveniences and corporate resources Communicate e&ternally, in a truthful manner, about how the Company is run internally Comply with the laws in all the countries in which we operate 'ave a simple and transparent corporate structure driven solely by business needs %anagement is the trustee of the shareholders( capital and not the owner.

1hapter" 1

Introduction
The term )Corporate *overnance+ means the set of institutional arrangements that leads mana ers to pursue shareholders interests rather than their o4n oals+ The relationship ,et4een the 1orporate ;overnance and 1ompetition is a rather comple5. ,ut crucial one to the desi n of appropriate economic policies. includin 1ompetition policy+ The relationship ,et4een 1ompetition and 1orporate ;overnance is to e5plore ho4 ;overnance structure of an or ani<ation must incorporate the policy of 1ompetition and to identify the possi,le concerns 4hich have come up in many *urisdictions in relations to 1ompliance Pro rammes+ $t is also relevant in the conte5t of the economic crisis. as a failure can ,e tri ered in the mar2et if incentives are not ali ned for the lon term and instead focus on short term oals+ 1ompetition is typically re arded as the main force that disciplines firms ,y 2eepin them responsive to their mar2ets. inducin them to adopt efficient practices =includin ood 1orporate ;overnance arran ements> and encoura in them to ma5imi<e efficiency+
Corporate governance can be defined as a combination of fairness, precision, accountability and sustainability of corporate behavior. *ood Corporate governance is a key factor to achieve the improved performance of an organization. It is fundamental element to safeguard interest of shareholders. ,or continuous and sustainable growth of an organization, there is no alternative to effective Corporate *overnance. The positive effect of corporate governance on different stakeholders ultimately is a strengthened economy, and hence good corporate governance is a tool for socioeconomic development The modern era of Corporate !ocial .esponsibility /C!.0 concept was evolved in 1234s when it was more commonly known as social responsibility. C!. has been defined as 5the integration of business operations and values whereby the interests of all stakeholders, including customers, employees, investors, and the environment are reflected in the organizations policies and actions. #y C!. practices an organization can improve communication with the community and other stakeholders, ensure accountability and transparency in its operation, improve internal decision making and cost saving, enhance corporate image, improve reputation and ability to enlarge market share and 6nhancement of customer true worthiness, profitability and sustainable development.

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Objective of the study

Primary Objective

To observe the current status of Corporate *overnance and Corporate !ocial .esponsibility /C!.0 and their relationship with organization performance. To identify corporate governance practices in 7utch #angla #ank 8td. Secondary Objective 1. To see the Corporate *overnance guidelines of #angladesh 9. To see the Corporate !ocial .esponsibility /C!.0 practice by the listed companies. :. To see the risk-return features of security stocks and their relationship with Corporate *overnance practices. ;. To see the Corporate *overnance practices of other countries.

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Methodology Type of research The research is both e&ploratory and descriptive in nature. To serve the ob"ective to see the Corporate *overnance practices and to e&plain the relationship between Corporate *overnance and firm+s performance I have gone for descriptive discussion on corporate governance and corporate social responsibility disclosure. Data source !ince the study was made on the listed banking companies in #angladesh, it was conventionally correct to use the secondary sources of information. The study has been primarily based upon information e&tracted from secondary sources like published annual reports, data base of 7haka !tock 6&change /7!60, websites, books, "ournals etc /C!.0 activities of the banks were very limited, as well as the disclosure regarding C!..

Research Hypothesis To see the relationship between return and corporate governance disclosure and risk and corporate governance disclosure we have used correlation study.

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<roposition 1 There is a relationship between corporate governance and each of the financial crisis, ownership structure, and regulation of listed companies in #angladesh.

There will be significant differences in measures of responses from different groups for strengthening corporate governance in #angladesh.

Chapter 02

iterature revie!

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Meaning " importance of Corporate #overnance Corporate governance is the set of processes, customs, policies, laws, and institutions affecting the way a corporation is includes directed, the administered relationships or controlled. the Corporate governance also among

many stakeholders involved and the goals for which the corporation is governed. The principal stakeholders are the shareholders=members, management, and the board of directors. >ther stakeholders include labor /employees0, customers, creditors /e.g., banks, bond holders0, suppliers, regulators, and the community at large. ,or ?ot-,or<rofit Corporations or other membership >rganizations the 5shareholders@ means 5members@ in the te&t below /if applicable0. Corporate governance is a multi-faceted sub"ect. An important theme of corporate governance is to ensure the accountability of certain individuals in an organization through mechanisms that try to reduce or eliminate the principal. A related but separate thread of discussions focuses on the impact of a corporate governance system in economic efficiency, with a strong emphasis shareholders+ welfare. There are yet other aspects to the corporate governance sub"ect, such as the stakeholder view and the corporate governance models around the world There has been renewed interest in the corporate governance practices of modern corporations since 9441, particularly due to the high-profile collapses of a number of large A.!. firms such as 6nron Corporation and %CI Inc. /formerly $orldCom0. In 9449, the A.!. federal government passed the !arbanes->&ley Act, intending to restore public confidence in corporate governance. In $ %oard Culture of Corporate #overnance, business author *abrielle >+7onovan defines corporate governance as )an internal system encompassing policies, processes

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and people, which serves the needs of shareholders and other stakeholders, by directing and controlling management activities with good business savvy, ob"ectivity, accountability and integrity. !ound corporate governance is reliant on e&ternal marketplace commitment and legislation, plus a healthy board culture which safeguards policies and processes+. >+7onovan goes on to say that )the perceived quality of a company+s corporate governance can influence its share price as well as the cost of raising capital. Buality is determined by the financial markets, legislation and other e&ternal market forces plus how policies and processes are implemented and how people are led. 6&ternal forces are, to a large e&tent, outside the circle of control of any board. The internal environment is quite a different matter, and offers companies the opportunity to differentiate from competitors through their board culture. To date, too much of corporate governance debate has centered on legislative policy, to deter fraudulent activities and transparency policy which misleads e&ecutives to treat the symptoms and not the cause. It is a system of structuring, operating and controlling a company with a view to achieve long term strategic goals to satisfy shareholders, creditors, employees, customers and suppliers, and complying with the legal and regulatory requirements, apart from meeting environmental and local community needs. .eport of !6#I committee /India0 on Corporate *overnance defines corporate governance as the acceptance by management of the inalienable rights of shareholders as the true owners of the corporation 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 C corporate funds in the management of a company.@ The definition is drawn from the *andhian principle of trusteeship and the 7irective <rinciples of the Indian Constitution. Corporate *overnance is viewed as ethics and a moral duty.

&istory of Corporate #overnance

In the 12th century, state corporation laws enhanced the rights of corporate boards to govern without unanimous consent of shareholders in e&change for statutory benefits like appraisal rights, to make corporate governance more efficient. !ince that time, and because most large publicly traded corporations in the A! are incorporated under corporate administration friendly 7elaware law, and because the A!+s wealth has been increasingly securitized into various corporate entities and institutions, the rights of

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individual owners and shareholders have become increasingly derivative and dissipated. The concerns of shareholders over administration pay and stock losses periodically has led to more frequent calls for corporate governance reforms. In the 94th century in the immediate aftermath of the $all !treet Crash of 1292 legal scholars such as Adolf Augustus #erle, 6dwin 7odd, and *ardiner C. %eans pondered on the changing role of the modern corporation in society. #erle and %eans+ monograph 5The %odern Corporation and <rivate <roperty@ /12:9, %acmillan0 continues to have a profound influence on the conception of corporate governance in scholarly debates today. ,rom the Chicago school of economics, .onald Coase)s 5The ?ature of the ,irm@ /12:D0 introduced the notion of transaction costs into the understanding of why firms are founded and how they continue to behave. ,ifty years later, 6ugene ,ama and %ichael Eensen)s 5The !eparation of >wnership and Control@ /12F:, Eournal of 8aw and 6conomics0 firmly established agency theory as a way of understanding corporate governance the firm is seen as a series of contracts. Agency theory+s dominance was highlighted in a 12F2 article by Gathleen 6isenhardt /5Agency theory an assessment and review@, Academy of %anagement .eview0. A! e&pansion after $orld $ar II through the emergence of multinational corporations saw the establishment of the managerial class. Accordingly, the following 'arvard #usiness !chool management professors published influential monographs studying their prominence %yles %ace /entrepreneurship0, Alfred 7. Chandler, Er./business history0, Eay 8orsch /organizational behavior0 and 6lizabeth %acIver /organizational behavior0. According to 8orsch and %acIver 5many large corporations have dominant control over business affairs without sufficient accountability or monitoring by their board of directors.@ !ince the late 12D4+s, corporate governance has been the sub"ect of significant debate in the A.!. and around the globe. #old, broad efforts to reform corporate governance have been driven, in part, by the needs and desires of shareowners to e&ercise their rights of corporate ownership and to increase the value of their shares and, therefore, wealth. >ver the past three decades, corporate directors+ duties have e&panded greatly beyond their traditional legal responsibility of duty of loyalty to the corporation and its shareowners. In the first half of the 1224s, the issue of corporate governance in the A.!. received considerable .etirement press !ystem attention due their a to wave the wave of C6> <ublic dismissals 6mployees+ activism /e.g. I#%, Godak, 'oneywell0 by boards. The California

/Cal<6.!0 led

of institutional shareholder

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/something only very rarely seen before0, as a way of ensuring that corporate value would not be destroyed by the now traditionally cozy relationships between the C6> and the board of directors /e.g., by the unrestrained issuance of stock options, not infrequently back dated0. In 122D, the 6ast Asian ,inancial Crisis saw the economies of Thailand, Indonesia, !outh Gorea, %alaysia andThe <hilippines severely affected by the e&it of foreign capital after property assets collapsed. The lack of corporate governance mechanisms in these countries highlighted the weaknesses of the institutions in their economies. In the early 9444s, the massive bankruptcies /and criminal led malfeasance0 to increased of 6nron and $orldCom, as well as lesser corporate debacles, such as Adelphia Communications, A>8, Arthur Andersen, *lobal Crossing, Tyco, shareholder and governmental interest in corporate governance.

Parties to corporate governance

<arties involved in corporate governance include the regulatory body /e.g. the Chief 6&ecutive >fficer, the board, management and shareholders0. >ther stakeholders who take part include suppliers, employees, creditors, customers and the community at large. In corporations, the shareholder delegates decision rights to the manager to act in the principal+s best interests. This separation of ownership from control implies a loss of effective control by shareholders over managerial decisions. <artly as a result of this separation between the two parties, a system of corporate governance controls is implemented to assist in aligning the incentives of managers with those of shareholders. $ith the significant increase in equity holdings of investors, there has been an opportunity for a reversal of the separation of ownership and control problems because ownership is not so diffuse. A board of directors often plays a key role in corporate governance. It is their responsibility to endorse the organization+s strategy, develop directional policy, appoint, supervise and remunerate senior e&ecutives and to ensure accountability of the organization to its owners and authorities. The Company !ecretary, known as a Corporate !ecretary in the A! and often referred to as a Chartered !ecretary if qualified by the Institute of Chartered !ecretaries and Administrators /IC!A0, is a high ranking professional who is trained to uphold the highest standards of corporate governance, effective operations, compliance and administration. All parties to corporate governance have an interest, whether direct or indirect, in the effective performance of the organization. 7irectors, workers and management receive

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salaries, benefits and reputation, while shareholders receive capital return. Customers receive goods and servicesH suppliers receive compensation for their goods or services. In return these individuals provide value in the form of natural, human, social and other forms of capital. A key factor is an individual+s decision to participate in an organization e.g. through providing financial capital and trust that they will receive a fair share of the organizational returns. If some parties are receiving more than their fair return then participants may choose to not continue participating leading to organizational collapse.

Principles
Gey elements of good corporate governance principles include honesty, trust and integrity, openness, performance orientation, responsibility and accountability, mutual respect, and commitment to the organization. >f importance is how directors and management develop a model of governance that aligns the values of the corporate participants and then evaluate this model periodically for its effectiveness. In particular, senior e&ecutives should conduct themselves honestly and ethically, especially concerning actual or apparent conflicts, and disclosure in financial reports.

Commonly accepted principles of corporate governance include 'ights and e(uitable treatment of shareholders >rganizations should respect the
rights of shareholders and help shareholders to e&ercise those rights. They can help shareholders e&ercise their rights by effectively communicating information that is understandable and accessible and encouraging shareholders to participate in general meetings. )nterests of other sta*eholders >rganizations should recognize that they have legal and other obligations to all legitimate stakeholders. 'ole and responsibilities of the board The board needs a range of skills and understanding to be able to deal with various business issues and have the ability to review and challenge management performance. It needs to be of sufficient size and have an appropriate level of commitment to fulfill its responsibilities and duties. There are issues about the appropriate mi& of e&ecutive and non-e&ecutive directors. )ntegrity and ethical behavior 6thical and responsible decision making is not only important for public relations, but it is also a necessary element in risk management and avoiding lawsuits. >rganizations should develop a code of conduct for their directors and e&ecutives that promotes ethical and responsible decision making. It is important to

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understand, though, that reliance by a company on the integrity and ethics of individuals is bound to eventual failure. #ecause of this, many organizations establish Compliance and 6thics <rograms to minimize the risk that the firm steps outside of ethical and legal boundaries. Disclosure and transparency >rganizations should clarify and make publicly known the roles and responsibilities of board and management to provide shareholders with a level of accountability. They should also implement procedures to independently verify and safeguard the integrity of the company+s financial reporting. 7isclosure of material matters concerning the organization should be timely and balanced to ensure that all investors have access to clear, factual information.

Issues involving corporate governance principles include internal controls and internal auditors the independence of the entity+s e&ternal auditors and the quality of their audits oversight and management of risk oversight of the preparation of the entity+s financial statements review of the compensation arrangements for the chief e&ecutive officer and other
senior e&ecutives the resources made available to directors in carrying out their duties the way in which individuals are nominated for positions on the board dividend policy

Systemic problems of corporate governance

7emand for information A barrier to shareholders using good information is the cost of processing it, especially to a small shareholder. The traditional answer to this problem is the efficient market hypothesis /in finance, the efficient market hypothesis /6%'0 asserts that financial markets are efficient0, which suggests that the small shareholder will free ride on the "udgments of larger professional investors. %onitoring costs In order to influence the directors, the shareholders must combine with others to form a significant voting group which can pose a real threat of carrying resolutions or appointing directors at a general meeting. !upply of accounting information ,inancial accounts form a crucial link in enabling providers of finance to monitor directors. Imperfections in the financial reporting process will cause imperfections in the effectiveness of corporate governance. This should, ideally, be corrected by the working of the e&ternal auditing process.

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ST$T+ O, CO'PO'$T+ #O-+'.$.C+ ). %$.# $D+S&

%angladesh In #angladesh, however, there have been no serious corporate scandals which have been enough to send shock waves to undermine confidence in the financial system, nor has the country found that it has reached the limits of conventional corporate financing mainly through bank lending. The country report identifies that 5the relatively low level of international investment in #angladesh does not provide a sufficient motivation for improving corporate governance, nor are there many traditional domestic motivations for improvement in corporate governance practices in #angladesh@. ?evertheless, that this does not mean that #angladesh should give low priority to corporate governance, as there are reasons other than capital market reforms to focus on corporate governance. The #angladesh country report notes the significance of corporate governance for a competitive private sector in a global market as well as for efficiently utilizing domestic investment to achieve greater economic development. *ood corporate governance practices will help develop and stimulate better business management, strategic management, and risk management, which, in the long-term, will make #angladeshi businesses more competitive. In addition, the lessons from the e&perience of the neighboring countries in !outh Asia are such that #angladesh can deploy good corporate governance to prevent the problems which have afflicted other countries rather than to solve them after the event. Comparison !ith South $sian countries As is documented in this volume, in #angladesh, failings in institutions, government agencies, legal enforcement, and market behavior have resulted in weak corporate governance. In many cases, the current system in #angladesh does not provide sufficient legal, institutional, or economic motivations for stakeholders to encourage and enforce good corporate governance practices. As a result, there are few rewards for companies that institute good corporate governance practices and no penalties for failing to do so. Targeted reforms in institutions or sectors can begin to provide the internal and e&ternal

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motivation for transparency and accountability that will lead to better corporate governance. Although <akistan, !ri 8anka, and India have some similarities with #angladesh in the way that the financial sector and private sector have developed historically, #angladesh+s neighbors have recognized the importance of corporate governance and increased transparency in the corporate sector. <akistan has a Code for Corporate *overnance to which all listed companies are now required to comply. India has had several high-level committees looking at corporate governance. The Confederation of Indian Industry /CII0 issued a voluntary code of desirable corporate governance in 122F and the !ecurities and 6&change #oard of India /!6#I0 approved mandatory corporate governance listing requirements in the year 9444. !ri 8anka also has a Code of #est <ractice on Corporate *overnance drawn up by the Institute of Chartered Accountants of !ri 8anka. In each country, the codes have begun the process of encouraging or requiring companies to recognize the importance of good corporate governance practices. In concert with the efforts to design benchmarks for good corporate governance that are relevant to !outh Asian countries, efforts are under way to harmonize and improve accounting and auditing standards. The Accounting and Auditing !tandards %onitoring #oard in !ri 8anka and the Audit Buality Control .eview Committee in <akistan are two particularly good e&amples that could be emulated in #angladesh.

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Chapter/ 0 Company profile

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The ,rand name ?8our Trusted Partner3 associated 4ith DBBL3s day7to7day operation+ Dutch7Ban la Ban2 Limited esta,lish this philosophy in their dealin s 4ith their customers. and offer them product and services that assure them to the essences of a relationship of partnership ,ased on trust and confidences. and upholdin and

maintainin mutuality of interests+ Leavin its competitors ,ehind. DBBL has ,een a,le to ma2e steady pro ress in terms of ,usiness ro4th. earnin the confidence of its customers and a,ove all creatin a lon listin ima e of your ,an2 in all the spheres of the society+ The ,an2 is involved in all areas of commercial ,an2in operations.

comprisin of trade finance. term finance. 4or2in capital finance and recently added lease and real estate finance in its operation+ $t also participates in syndicate finance to a num,er of lar e pro*ects+

;istory o! DBBL
Dutch Ban la Ban2 Limited =DBBL> a pu,lic company limited ,y shares. incorporated in Ban ladesh in the year 1&&( under companies Act 1&&)+ DBBL7 a Ban ladesh @uropean private *oint venture scheduled commercial ,an2 commenced formal operation from June '. 1&&-+ The head office of the Ban2 is located at #ena2allayan Bha,an =)th floor>. 1&(. Moti*heel 1AA. Dha2a. Ban ladesh+ 6ith '%B eCuity holdin . the !etherlands Development Finance company =FMO> of the !etherlands is the international co7sponsor of the Ban2+ Out of the rest 9%B. -%B eCuity has ,een provided ,y prominent local entrepreneurs and industrialists D the rest 1%B shares is the pu,lic issue+ Durin the initial operatin year =1&&-71&&9> the ,an2 received s2ill au mentation technical assistance from AB! Amro Ban2 of the !etherlands+

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#tartin 4ith one Branch in 1&&-. DBBL has e5panded to #i5ty four ,ranches D a,out '(% ATM Booths +To provide client services all over Ban ladesh it has esta,lished a 4ide correspondent ,an2in relationship 4ith a num,er of local ,an2s+ To facilitate international trade transactions. it has arran ed correspondent relationship 4ith lar e num,er of international ,an2s that are active across the lo,e+

C-8( -B<(C .=(

Dutch7Ban la Ban2 ,elieves in its uncompromisin commitment to fulfill its customer needs and satisfaction and to ,ecome their first choice in ,an2in + Ta2in cue from its pool esteemed clientele. Dutch7Ban la Ban2 intends to pave the 4ay for a ne4 era in ,an2in that upholds and epitomi<es its vaunted marCues E8our Trusted PartnerE+

he Board and its Committees

The %oard Chairman
%r. Abul 'asnat %d. .ashidul Islam Directors Mr+ Faheed Gossain Hhan Mr+ Bernhard Frey " !ominee of @cotrim Gon Hon Limited Mr+ #haha,uddin Ahmed " @lected from ;eneral #hareholders3 ;roup Mr+ Md+ #hahidur IahmanJ Mr+ A,edur Iashid Hhan Mr+ #ayem AhmedJJ Dr+ $rshad Hamal Hhan " $ndependent Director Dr+ #yed Fa2hrul Ameen " Director from the Depositors Mr+ 1ho4dhury M+ Ashraf Gossain " Director from the Depositors Mr+ Md+ 8easin Ali " @57officio Director he Committees o! the Board ". ()ecutive Committee o! the Board o! Directors Mr+ A,edur Iashid Hhan " 1hairman Mr+ A,ul Gasnat Md+ Iashidul $slam " Mem,er Mr+ Faheed Gossain Hhan " Mem,er Mr+ #haha,uddin Ahmed " Mem,er Mr+ #ayem Ahmed " Mem,er Mr+ Md+ 8easin Ali " Mem,er $. Audit Committee o! the Board o! Directors /'

Mr+ Faheed Gossain Hhan " 1hairman Mr+ A,ul Gasnat Md+ Iashidul $slam " Mem,er Mr+ A,edur Iashid Hhan " Mem,er Mr+ #ayem Ahmed " Mem,er Dr+ $rshad Hamal Hhan " Mem,er JMr+ Md+ #hahidur Iahman resi ned and the resi nation 4as accepted ,y the Board in its :-th meetin held on January %9. /%%&+ JJMr+ #ayem Ahmed 4as appointed ,y the Board in its :-th meetin held on January %9. /%%&+

#roducts A, Banking #roduct

", Deposit #avin s Deposit Account 1urrent Deposit Account #hort Term Deposit Account Iesident Forei n 1urrency Deposit Forei n 1urrency Deposit 1onverti,le Ta2a Account !on71onverti,le Ta2a Account @5porterKs F1 Deposit=FBPAI> 1urrent Deposit Account7Ban2 #hort Term Deposit Account7Ban2

$, Loan > Advances

Life Line =a complete series of personnel credit facility> details Loan a st+ Trust Ieceipt Transport Loan Ieal @state Loan =Ies+ D 1omm+> Loan A st+ Accepted Bill $ndustrial Term Loan A ricultural Term Loan Lease Finance Other Term Loan FMO Local currency Loan for #M@ FMO Forei n currency Loan 1ash 1redit =Gypothecation>

/)

#mall #hop Financin #cheme Overdraft

b, 8etail Banking #roducts

1DBBL 6uture Line, DBBL Deposit Plus #cheme =DP#> DBBL Periodic Benefit #cheme =PB#> DBBL Bochore Der un #cheme =BD#> DBBL 1hildren @ducation #avin s #cheme =1G@##> DBBL Pension Plus =PP>

c, Card #roducts
DBBL A 1 *ervice Dutch Ban la Ban2 Limited has introduced ATM service to its 1ustomers+ The card 4ill ena,le to save our valued customers from any 2ind of predicament in emer ency situation and time consumin formalities+ DBBL ATM 1ard 4ill ive our distin uished 1lients the opportunity to 4ithdra4 cash at any time. even in holidays. /) hours a day. 9 days a 4ee2+ DBBL09(:?* Classic Card +debit, DBBL09(:?* 1aestro card +debit, DBBL09(:?* =.*A (lectron card +debit, DBBL09(:?* *ilver -D card +credit, DBBL09(:?* @old -D card +credit, /(

d, . #roducts
-nline BankingA Dutch Ban la ,an2 Ltd has selected all necessary items for truly on7line ,an2in + The truly on7line ,an2in officially inau urated on 'rd January. /%%(+ $n this uniCue real7time. any74here. any74ay ,an2in pro ram of DBBL. the valued customers and truested partners 4ill en*oy a full ran e of modern ,an2in services at desired speed. a,solute accuracy and compititive price+ A 1 > #-*A 6eaturesA Account ,alance enCuiry 1ash 4ithdra4al L /) hours a dey Mini statement printin #tatement reCuest Pin 1han e IeCuest for cheCue ,oo2 Fund transfer 4ithin your o4n accounts Payments for mo,ileA T!T. as. electricity. 4ater. internet. crefit card ,ills from your savin and current account

(, .nternet Banking
The follo4in are the $nternet Ban2in Features for DBBL3s Ietail and 1orporate 1ustomers" Account *ummary The 1ustomer 4ill ,e a,le to vie4 the list of 1urrent. #avin . Term Deposit and Loan accounts 4ith the current ,alance+ Account Details The 1ustomer can choose a particular account and see the account details includin unclear fund. limit. interest accrued etc+ Account Activity /-

The customer can see or print his transaction activity in a iven account for a particular period+ rans!er 6unds The customer can transfer funds from one of his accounts to another of his accounts 4ithin the ,an2+

hird #arty rans!er B The customer can transfer funds from one of his accounts to another customer3s account 4ithin the ,an2+ #ay Bills The customer can pay his utility ,ill =li2e @lectricity. 6A#A. ;A#. Telephone. Mo,ile. $#P etc+> *tanding .nstructions The customer can setup. modify or delete standin instructions for transferrin fund from one of his account to another account =his account or 'rd party>+ -penC1odi!y erm Deposit The customer can open a term deposit ,y transferrin funds from one of his current or savin s accounts 4ith the ,an2+ Ge can also modify the TD and redeem A part7redeem it+ Loan 8epayments The customer can ma2e payment of the loan installment from his 1A#A account+ *tatement 8eDuest The customer can ma2e a reCuest for account statement for a reCuired period+ The ,an2 4ill manually service this reCuest+ CheDue Book 8eDuest The customer can ma2e a reCuest for a 1heCue ,oo2+ CheDue *tatus .nDuiry

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The customer can choose an account and enter the 1heCue num,er for 4hich the status should ,e vie4ed+ *top #ayment CheDue The customer can mar2 his 1heCue leaf as stop payment+ .nterest 8ate .nDuiry The customer can Cuery on the interest rates on 1A#A D Term Deposit Products+ 6oreign ()change 8ate .nDuiry The customer can Cuery on the Forei n @5chan e =FM> Iates usin this function+ 8e!ill #re0#aid Card The customer can ,uy a refill num,er for his pre7paid mo,ile phone or $#P lin2+ Change #assword The customer can chan e his $nternet Ban2in Pass4ord usin this function+ ()tra 6eatures !or Corporate Customer Letter o! Credit The customer can initiate the L1 application throu h $nternet Ban2in + Bank @uarantee The customer can initiate the Ban2 ;uarantee throu h $nternet Ban2in + Limits Euery The customer can vie4 his Loan Limits and Limits Utili<ation throu h $nternet Ban2in +

).D2ST'3 $.$ 3S)S

8ivalry among e)isting !irmsA
Ban2in industry is ro4in rapidly+ At present there are more than (% national. private. forei n D speciali<ed ,an2s in Ban ladesh and there are still un7tapped

/:

customers in this industry+ #o. price 4ar is still not very destructive+ Ban2s can ro4 4ithout ra,,in others mar2et share+ Thou h the !1B3s account for most of the activities in the industry. P1B3s D forei n ,an2s are increasin their shares+ Their mar2et is very much fra mented and their tar et customers are also from the same roup+ Moreover. all the !1B3s are oin to ,e P1B3s very soon+ #o. in future there mi ht ,e destructive price 4ars+ There is a lo4 de ree of differentiation amon the service provided ,y the ,an2s+ Only the forei n ,an2s and some private ,an2s provide some special services+ #4itchin cost is also not very hi h+ #o. in these respect there mi ht ,e price 4ars in future+ #o. it can ,e concluded that rivalry amon firms is still not very hi h ,ut the industry is ettin competitive day ,y day+

hreat o! new entranceA

First movers advanta e in Ban2in industry is not that much si nificant+ The process to enter this industry is not very complicated+ Bans need some =around 1%% million> capital to start its operation 4hich made the entry little tou her+ Le al ,arriers re ardin entry and e5it are not that hi h+

Thou h. process of entry has ,ecome tou her than earlier. still. it is fairly easy+ $t is e5pected that ne4 firms 4ill *oin this industry and de ree off competition 4ill increase+

hreat o! substituteA
#avin s and depository institutions. insurance companies. leasin companies and !;O3s are alternative service provider of ,an2s+ They provide similar 2ind of activities to some e5tend+ Go4ever. their num,er and si<e are very small+ They capture a very small portion of the total mar2et+

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Threat of su,stitute from other institutions is Cuite lo4 for ,an2in industry+ $t is li2ely that competition 4ill arise 4ithin the industry that is from other ,an2s+

Bargaining power o! buyersA

Byers or customers are price sensitive to some e5tend+ But ettin credit at the ri ht time is very important for them+ To ensure that they mi ht o for ,etter ,an2s and afford hi her service char es+ The num,er of ,uyers 4ho ,orro4s a lot and use ,an2in services are still fe4 in num,er+ #o. they have stron ,ar ainin po4er ,ecause num,ers of ,an2s are lar e in num,er+ Go4ever. due to the success in #M@ sector customers of ood ,an2s are Cuite lar e in num,er+ #o. it can ,e said that ,ar ainin po4er of selected customers is Cuite hi h ,ut overall ,ar ainin po4er is moderate and ,an2s can e5tract relatively hi h price in future as 4ell+

Bargaining power o! suppliersA

The main suppliers of fund for ,an2s are its customers+ !um,ers of customers are Cuiet hi h and no4 they have the option to choose amon many ,an2s+ #o. their ,ar ainin po4er has increased+ Thou h the ,ar ainin po4er of ,uyers has increased. still a relatively hi her profit can ,e o,taina,le+ 1onsiderin the overall condition of the ,an2in industry it can ,e said that the de ree of competition amon the ,an2s is moderate and this competition is li2ely to increase+ Bar ainin po4er of ,uyers and suppliers are in such a situation that ensures that ,an2s can still earn su,stantial amount of profit+

*F- A9ALG*.*

'%

Strength
#atisfactory asset Cuality ;ood internal capital eneration #atisfactory operatin efficiency Diversified product lines Lo4 human resource turnover @5perienced Mana ement team $nvestment in #M@ Basel7$$ compliance for adeCuacy 1reation of ,rand ima e Dual currency credit card O! line products D services

4ea*nesses
Limited mar2et share Dependency on Term Deposit Moderate M$# Gi h cost of fund Moderate corporate overnance

Opportunities
capital

Threats
$ncreasin cost of fund Mar2et pressure for increasin #LI $mplementation of Basel7$$ $ncreased Mar2et competition Product Iis2+ the

Corporate Governance

Corporate #overnance is the system of internal controls and procedures used to define and protect the rights and responsibilities of various sta*eholders5 The %an* has ade(uately complied !ith all the Corporate #overnance #uidelines of %angladesh %an* and Securities and +6change Commission 1S+C75 )t is ensured by the %oard that all activities and transactions of the %an* are conducted in compliance !ith international best practices to protect the highest interest of all the sta*eholders5

)nternal control8 transparency and accountability Ma6imi9ing value for shareholders through performance !ith good governance is the responsibility of corporate management5 )n line !ith the best practice8 the corporate governance systems and practices in D%% are designed to ensure ade(uate internal control in operational process8 transparency and accountability in doing business: and proper and timely disclosures in financial reporting so that value is ma6imi9ed for all the sta*eholders5

'1

'esponsibilities are segregated bet!een the board and management 'esponsibilities and functions are segregated in a !ay to stri*e the right balance bet!een the %oard and the Management5 The %oard provides leadership and direction of the %an*8 approves strategic plans and major policy decisions and supervises performance of the management5 The %oard is responsible for ensuring and encouraging compliance8 ethical standard and integrity throughout D%%

Proper delegation of authority The %an* has a policy for delegation of authority5 $ccordingly8 authorities are delegated to Managing Director;C+O8 other senior management and cross functional management committees comprising head of functional divisions and senior management to revie! achievements of *ey objectives5 The %oard has also clearly delegated authorities to %oard Committees !ith specific terms of reference !hich sets out their objectives and responsibilities5

The %oard The %oard is comprised of directors having diverse s*ills8 e6perience and e6pertise to add value to!ards better corporate governance of the %an* and ma6imi9ing value for all sta*eholders5 The %oard discharges its responsibilities itself or through various committees5 The %oard meets on a regular basis to discharge its responsibilities5The %oard is made up of < directors including a non= e6ecutive chairman and 0 non=e6ecutive directors representing shareholders8 one independent director8 t!o directors from depositors5

'/

)ndependent Director and Depositor Director )ndependent Director D%% has one independent director in the %oard of the %an*5 )n compliance !ith corporate governance guidelines of S+C8 Dr5 )rshad >amal >han !as appointed as an independent director in the %oard of the %an*5 Dr5 >han is a Professor of Department of +conomics8 Chittagong 2niversity5

Depositor Director D%% has t!o depositor directors in the %oard of the %an*5 )n compliance !ith

corporate governance guidelines of %angladesh %an*8 Dr5 Syed ,a*hrul $meen and Mr5 Cho!dhury M5 $shraf &ossain !ere appointed as Directors representing depositors of the %an*5 Mr5 $meen is a Professor of Department of Civil +ngineering in %angladesh 2niversity of +ngineering and Technology 1%2+T7 and Mr5 &ossian is a businessman having a Masters Degree in ?ournalism5

>ey objectives of the directors The %oard is responsible for ensuring governance and performance of the company by directing and overseeing activities of the e6ecutive management by ma*ing them transparent8 accountable and responsible5 The directors are e6pected to protect the long term interest of the shareholders and all sta*eholders by setting *ey objectives for the management and by monitoring and ensuring that those objectives are achieved by the management in a sustainable !ay !hile maintaining transparency and accountability at every stage of operations5

''

The %oard must be satisfied that sufficient ris* management systems are in place to mitigate core ris*s of the %an* and that there are ade(uate chec*s and balances in the internal control system to protect the value and (uality of assets of the %an*5The %oard of Directors is entitled to timely8 accurate and ade(uate information " data to ensure effective control over operational8 financial8 strategic8 compliance8 governance and ris* management issues of the %an*5 The %oard is responsible for ensuring the follo!ing Setting *ey targets of the %an* and monitoring progress to!ards achievement of such targets5 $pproval of major policy decisions and long term strategic plans to achieve *ey objectives in an efficient and effective !ay5 Disclosure of accurate8 timely and reliable information to shareholders5 They are e6pected to Demonstrate the highest professional and ethical standard5 %e fully independent from management5 %e *no!ledgeable about the business and challenges that D%% is facing5 $pply prudence and judgment in decision ma*ing5 Display commitments to the %an* and its all sta*eholders through participation in the affairs of the %an*5

')

Credit 'ating of the %an* )n line !ith %angladesh %an*@s %'PD Circular .o5 0A dated ?uly 0B8 200A and in order to improve the ris* management and corporate governance system of the %an* and to safeguard the interest of investors8 depositors8 creditors8 shareholders and the %an* Management as a !hole8 Credit rating of the %an* for the year 200C !as done by Credit 'ating $gency of %angladesh as double $$ three7 rating in the be completed before ?une 008 20DD5 imited 1C'$%75 The date of rating by C'$% !as 2C ?une 20D05C'$% assigned @$$0@ 1pronounced ong Term and ST=D rating in the Short Term5 Credit rating !ill be done regularly on a yearly basis and credit rating of 20D0 !ill

$udit Committee of the %oard The $udit Committee of the %oard is comprised of the follo!ing non=e6ecutive members of the %oard/ Mr5 Eahid &ossain >han / Chairman Mr5 Sayem $hmed / Member Dr5 )rshad >amal >han / Member Salient ,eature of the Objectives and 'esponsibilities of the $udit Committee of the %oard8 number of $udit Committee meeting held in 20D0 and 'eport of the $udit Committee of the %oard are given on pages B2 to B0 of this $nnual 'eport5 Directors@ 'emuneration

'(

The non=e6ecutive directors of the %oard representing shareholders do not ta*e any remuneration or reimbursement of any e6penses for attending %oard meeting or %oard Committee meeting or for any other purpose5 The fees and e6penses incurred for )ndependent Director and Depositor Directors are sho!n in .ote 0C to the ,inancial Statements5 The remuneration paid to the Manag Director is given in .ote 0< to the ,inancial Statements Directors@ 'esponsibility for )nternal Control and ,inancial 'eporting Directors@ statement on their responsibility for internal control and financial reporting of the %an* is given on page D2D of this $nnual 'eport5 +6ternal audit $5 Fasem " " Co58 Chartered $ccountants 1$ Cooperating firm of Price!aterhouseCoopers7 is the statutory auditors of the %an*5 They don@t provide any other accounting8 ta6ation or advisory services to the %an* e6cept certification of cash incentives payable to e6porters http/;;!!!5dutchbanglaban*5com;investorGrelations;$nnualG'eportG20D0;PD,s;Cor porateH20governance5pdf

Dutch=%angla %an* td5 Compliance report as per !ecurities C 6&change Commission+s ?otification dated 94th ,ebruary, 944I for all companies listed with any !tock 6&change in #angladesh in order to improve Corporate *overnance in the interest of Capital %arket on 5Comply or 6&plain@ basis. Table I5ACorporate #overnance Disclosure by Dutch=%angla %an* td
Compliances !tatus

Condition ?o-

Title

Complied

?on Complied

D500

%oard of Directors

'-

1.1 1.9/i0 1.9/ii0 1.:

#oard+s size Independent 7irector Appointment of Independent 7irector Chairman of the #oard and Chief

J J J J

6&ecutive >fficer /C6>0

D5I 1.;/a0 1.;/b0 The directorsJ report to shareholders ,airness of ,inancial !tatements %aintenance of proper books of accounts J J

1.;/c0

Consistent application of Accounting <olicies in

preparation of ,inancial !tatements

1.;/d0 1.;/e0 1.;/f0

>bservance of #angladesh Accounting !tandard /#A!0 !oundness in design and efficiency of internal control Ability to continue as going concern

J J J

1.;/g0

!ignificant deviations from last year in operating result

1.;/h0

!ummary of key operating and financial data for the last threeJ years

1.;/i0

7eclaration of stock dividend

1.;/"0

7isclosure about number of #oard meeting held during the year J and attendance by each 7irector

1.;/k0

7isclosure about shareholding pattern

'9

2500 9.1

Chief ,inancial Officer8 &ead of )nternal $udit and Company Appointment of J

Chief ,inancial >fficer /C,>0,'ead of Internal Audit, Company !ecretary

9.9 .equirements to Attend #oard %eetings J

9.9/a0 9.9/b0

Chief ,inancial >fficer /C,>0 Company !ecretary

J J

0500 :.1/i0 :.1/ii0 :.1/iii0 :.9/i0 :.9/ii0

$udit Committee ?umber of %embers of Audit Committee Inclusion of Independent 7irector in the Audit Committee ,illing of the casual vacancy in the Audit Committee !election of Chairman of the Audit Committee Bualification of Chairman of the Audit Committee J J J J

050 :.:.1/i0 :.:.1/ii0 :.:.1/ii0/a0 :.:.1/ii0/b0

'eporting of the $udit Committee .eporting its activities to the #oard of 7irectors .eport to the #oard by the Audit Committee on conflicts of interest suspected or presumed fraud or irregularity or material defect in the internal control system J J

:.:.1/ii0/c0

suspected infringement of laws, including securities related laws, rules and regulations

':

:.:.1/ii0/d0 :.:.9 :.; I50 ;.4/i0 ;.4/ii0 ;.4/iii0 ;.4/iv0 ;.4/v0 ;.4/vi0 ;.4/vii0

any other matter 7irectors .eporting to the Authorities .eporting to the !hareholders and *eneral Investors +6ternal; Statutory $uditors Appraisal or valuation services of fairness opinions ,inancial information systems design and implementation J J J

#ook-Geeping or other services related to ,inancial !tatements J #roker-dealer services Actuarial services Internal Audit services Any other services that the Audit Committee determines J J J

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