v c

corporate governance

Corporate Governance 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 SEe. 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.

Internal control, transparency andaccountability

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.

Responsibilities are segregatedbetween the board and management

Responsibilities and functions are segregated in

a way to strike the right balance between the

Board and the Management. The Board provides

leadership and direction of the Bank, approves

strategic plans and major policy decisions and

supervises performance of the management.

The Board is responsible for ensuring and

encouraging compliance, ethical standard and

integrity throughout DBBL.

Proper delegation of authority

The Bank has a policy for delegation of authority.

Accordingly, authorities are delegated to CEO,

other senior management and cross functional

management committees comprising head of

functional divisions and senior management to

review achievements of key objectives. The

Board has also clearly delegated authorities to

Board Committees with specific terms of

reference which sets out their objectives and

responsibilities.

The Board

The Board is comprised of directors having

diverse skills, experience and expertise to add

value towards better corporate governance of

the Bank and maximizing value for all

stakeholders.

The Board discharges its responsibilities itself or

through various committees. The Board meets on

a regular basis to discharge its responsibilities.

The Board is made up of 8 directors including a

non-executive chairman and 3 non-executive

directors representing

independent director,

depositors and one

director as follows:

shareholders, one

two directors from

executive managing

Mr. Zahid Hossain Khan: Chairman

Mr. Sayem Ahmed

Mrs. Frey -Tang Yuen Mei, Barbara: Nominee of Ecotrim Hong Kong Limited

Mr. Md. Fakhrullslam: 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. K. Shamshi TabrezEx-officio Director (Managing Director)

Chairman of the BoardThe non-executive Chairman of the Board is fully

independent of the Managing Director (CEO) of

the Bank.

Independent Director and DepositorDirector

Independent Director

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 in

the Board of the Bank. Dr. Khan is a Professor of

Department of Economics, Chittagong University.

Depositor Director

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 and Mr. Hossian is a businessman

having a Masters Degree in Journalism.

Key objectives of the directors

The Board is responsible for ensuring

governance and performance of the company by

directing and overseeing activities of the

executive management by making them

transparent, accountable and responsible. The

directors are expected to protect the long term

interest of the shareholders and all stakeholders

by setting key objectives for the management

and by monitoring and ensuring that those

objectives are achieved by the management in a

sustainable way while maintaining transparency

and accountability at every stage of operations.

The Board must be satisfied that sufficient risk

management systems are in place to mitigate

core risks of the Bank and that there are

adequate checks and balances in the internal

control system to protect the value and quality

of assets of the Bank.

The Board of Directors is entitled to timely,

accurate and adequate information & data to

ensure effective control over operational,

financial, strategic, compliance, governance and

risk management issues of the Bank.

The Board is responsible for ensuringthe following

• Setting key targets of the Bank and

monitoring progress towards

achievement of such targets.

• Approval of major policy decisions and

long term strategic plans to achieve

key objectives in an efficient and

effective way.

• Disclosure of accurate, timely and

reliable information to shareholders.

They are expected to

• Demonstrate the highest professional

and ethical standard.

• Be fully independent from management.

• Be knowledgeable about the business

and challenges that DBBL is facing.

• Apply prudence and judgment in

decision making.

• Display commitments to the Bank and

its all stakeholders through

participation in the affairs of the Bank.

Number of Board Meeting held in 2011

Number of Board Meetings held in 2011 and the

attendance of each Director are shown in

Annexure-A of Corporate

Guidelines of SEe.

Governance

The Committees of the Board of Directors

As per Bangladesh Bank guidelines, the Board

has two committees namely the Executive

Committee and the Audit Committee. Each

Committee operates under specific Terms of

Reference (TOR) that sets out its responsibilities

and composition.

The TORs are designed and reviewed to ensure

that the objectives of each committee are

achieved in an effective way and that regulatory

obligations and obligation to shareholders are

fulfilled. The Committee regularly evaluates

progress towards key objectives. Accordingly,

time and efforts are dedicated to focus on

responsibilities those are central to achieve the

core objectives of respective committees.

Executive Committee of the Board

The Executive Committee of the Board is

comprised of the following members.

Mr. Sayem Ahmed

Mr. Zahid Hossain Khan

Mr. K. Shamshi Tabrez

Chairman

Member

Member

Responsibility of Executive Committee

The responsibility of Executive Committee of the

Board is clearly delegated by the Board.

Accordingly, the EC exercises all the powers and

functions on behalf of the Board in regard to:

• approving credit proposals, monitoring

risk status and quality of loan portfolio,

• administrative affairs and

• financial affairs

However, all policy matters and strategic issues

are dealt with by the Board of Directors of the

Bank.

Audit Committee of the Board

The Audit Committee of the Board is comprised

of the following non-executive members of the

Board:

Mr. Sayem Ahmed

Mr. Zahid Hossain Khan

Dr. Irshad Kamal Khan

Chairman

Member

Member

Salient Feature of the Objectives andResponsibilities of the Audit Committee of theBoard, number of Audit Committee meeting

held in 2011 and Report of the Audit Committee

of the Board are given on pages 48 to 49 of this

Annual Report.

Directors' Remuneration

The non-executive directors of the Board

representing shareholders do not take any

remuneration or reimbursement of any

expenses for attending Board meeting or Board

Committee meeting or for any other purpose.

The fees and expenses incurred for Independent

Director and Depositor Directors are shown in

Note 39 to the Financial Statements.

The remuneration paid to the Managing Director

is given in Note 38 to the Financial Statements.

Preparation of Financial Statements

Financial statements of DBBL give a true and

fair view of the state of affairs of the Bank and

the results of its operations and cash flows. All

the applicable Bangladesh Accounting

Standards and Bangladesh Financial Reporting

Standards adopted by ICAB are complied with

for preparation of financial statements. The

financial statements are prepared by the

management and approved by the Board of

Directors and audited by auditors appointed in

the Annual General Meeting.

Directors' Responsibility for InternalControl and Financial Reporting

Directors' statement on their responsibility for

internal control and financial reporting of the

Bank is given on page 248 of this Annual Report.

External audit

A. Qasem & Co., Chartered Accountants (A

Cooperating Firm of PricewaterhouseCoopers) is

the statutory auditors of the Bank. They don't

provide any other accounting, taxation or

advisory services to the Bank except certification

of cash incentives payable to exporters.

Compliance with Bangladesh Bankregulations

As a commercial bank, DBBL is regulated and

supervised by Bangladesh Bank under Bank

Company Act 1991 and rules and regulations

made there under. DBBL attaches highestpriority to strict compliance with all regulatory

requirements of Bangladesh Bank in terms of

core risk management, capital adequacy ratio,

foreign exchange regulations, liquidity

management, KYC and anti-money laundering

compliance etc.

Audit and Inspection by Bangladesh Bank

Bangladesh Bank also undertakes audit &

inspection of DBBL at regular intervals.

Compliance with observations and

recommendations made by Bangladesh Bank

help the Bank to improve internal control, risk

management, corporate governance and

regulatory compliance maximizing benefit for all

stakeholders.

Compliance with Corporate GovernanceGuidelines of Bangladesh Bank

DBBL has also adequately complied with

Corporate Governance Guideline of Bangladesh

Bank (BRPD Circular No. 06 dated February 04,

2010) in terms of overall business activities of

the Bank including credit and risk management,

internal control, human resource management

as well as income and expenses. Segregation of

financial, operational and administrative

authorities and responsibilities between Board

and Management have been also ensured.

Compliance with SEC regulations

As a listed company, DBBL is regulated by

Securities and Exchange Commission (SEC). We

have adequately complied with corporate

governance guidelines issued by the Securitiesand Exchange Commission.

Credit Rating of the Bank

In line with Bangladesh Bank's BRPD Circular No.

06 dated July OS, 2006 and in order to improve

the risk management and corporate governance

system of the Bank and to safeguard the interest

of investors, depositors, creditors, shareholders

and the Bank Management as a whole, Credit

rating of the Bank for the year 2010 was done by

Credit Rating Agency of Bangladesh (CRAB). The

date of rating by CRAB was 23 June 2011.

CRAB assigned 'AA2' (pronounced as double AA

two) rating in the Long Term and ST-1 rating in

the Short Term.

Credit rating will be done regularly on a yearly

basis and credit rating of 2011 will be completed

before June 30, 2012.

Relations and communication withshareholders

The Bank attaches highest importance on two

way communications with the shareholders. The

Bank believes that the shareholders should have

access to all relevant information about the Bank

to make informed judgment and decisions. All

the relevant information is placed in website

(www.dutchbanglabank.com) for convenience of

the shareholders. As per SEC guidelines all the

price-sensitive information having any possible

impact on share prices of the Bank are

communicated to the shareholders by

publication in national dailies and through

website of DSE, CSEand SEe. Quarterly financial

statements are communicated to all the

shareholders through DSE, CSE and SEe.

Half-yearly financial statements are directly

communicated to all the shareholders. Audited

yearly Financial Statements are published in the

national dailies. The half-yearly and yearly

results and press releases are also made

available in our website. The Annual General

Meeting provides very good opportunities for

communication with shareholders. All the

suggestions or recommendations made by the

shareholders in AGM or any time during the year

are taken very seriously for compliance and

better corporate governance of the Bank.

Status of compliance with the conditions imposed by the Securities and ExchangeCommission's Notification No. SEC/CMRRCD/ 2006-158/Admin/02-08 dated February 20,2006 issued under Section 2CCof the Securities and Exchange Ordinance, 1969

Compliance status Explanation for(Put./ in the non-Condition

Title appropriate column)No. compliance

Complied I Non- with the

Complied condition

1.00: Board of Directors

1.1 The number of the Board members of the ./Board's size company should not be less than 5 (five) and

more than 20 (twenty).

1.2 (i) At least one tenth (1/10) of the total number of ./Independent the Company's Board of Directors, subject to a

Directors minimum of one, should be independent directors.

(ii) The independent director(s) should be ./appointed by the elected directors.

1.3 The positions of the Chairman of the Board and ./Chairman & Chief Executive Officer of the Company should

CEO preferably be filled by different individuals. The

Chairman of the company should be elected

from among the directors of the company. The

Board of Directors should clearly define

respective roles and responsibilities of the

Chairman and the Chief Executive Officer.

1.4: The Directors' Report to Shareholders

(a) The financial statements prepared by the ./management of the issuer company presentfairly its state of affairs, the result of its

operations, cash flows and changes in equity.

(b) Proper books of account of the issuer ./company have been maintained.

(c) Appropriate accounting policies have been ./consistently applied in preparation of the financial

statements and that the accounting estimates are

based on reasonable and prudent judgment.

(d) International Accounting Standards, as ./applicable in Bangladesh, have been followed in

preparation of the financial statements and any

departure there from has been adequately

disclosed.

(e) The system of internal control is sound in ./design and has been effectively implemented

and monitored.

(f) There are no significant doubts upon the ./issuer company's ability to continue as a going

concern. If the issuer company is not considered

to be a going concern, the fact along with

reasons thereof should be disclosed.

(g) Significant deviations from last year in Not Applicableoperating results of the issuer company should

be highlighted and reasons thereof should be

explained.

(h) Key operating and financial data of at least ./preceding three years should be summarized.

(i) If the issuer company has not declared Not Applicabledividend (cash or stock) for the year, the reasons

thereof should be given.

(j) The number of Board meetings held during ./the year and attendance by each director should

be disclosed. (see at annexure-A)

(k) The pattern of shareholding should be ./reported to disclose the aggregate number of

shares (along with name wise details where

stated below) held by:-

(i) Parent/subsidiary/Associated companies and

other related parties (name wise details);

(ii) Directors, Chief Executive Officer, Company

Secretary, Chief Financial Officer, Head of

Internal Audit and their spouses and minor

children (name wise details);

(iii) Executives; and

(iv) Shareholders holding ten percent (10%) or

more voting interest in the company (name wise

details). (see at Annexure-B)

2.00: Chief Financial Officer (CFO), Head of Internal Audit and Company Secretary

2.1Appointment

2.2Required to

Attend Board

Meeting

The company should appoint a Chief Financial

Officer (CFO), a Head of Internal Audit and

Company Secretary. The Board of Directors

should clearly define respective roles,

responsibilities and duties of the CFO, the Head

of Internal Audit and the Company Secretary.

The CFO and the Company Secretary of the

companies should attend meetings of the Board

of Directors, provided that the CFO and/or the

Company Secretary should not attend such part

of a meeting of the Board of Directors which

involves consideration of an agenda item

relating to the CFO and/or the Company

Secretary.

./

3.00: Audit Committee

The company should have an Audit Committee .Ias a sub-committee of the Board of Directors.

The Audit Committee should assist the Board of

Directors in ensuring that the financial

statements reflect true and fair view of the state

of affairs of the company and in ensuring a good

monitoring system within the business.

The Audit Committee shall be responsible to the

Board of Directors. The duties of the Audit

Committee should be clearly set forth writing.

3.1: Constitution of Audit Committee

(i) The Audit Committee should be composed of .Iat least 3 (three) members.

(ii) The Board of Directors should appoint .Imembers of the Audit Committee who should

be directors of the company and should include

at least one independent director.

(iii) When the term of service of the Committee Not Applicable

members expires or there is any circumstance

causing any Committee member to be unable to

hold office until expiration of the term of service,

thus making the number of the Committee

members to be lower than the prescribed number

of 3 (three) persons, the Board of Directors should

appoint the new Committee member(s) to fill up

the vacancy (ies) immediately or not latter than 1

(one) month from the date of vacancy (ies) in the

Committee to ensure continuity of the

performance of work of the Audit Committee.

3.2: Chairman of Audit Committee

(i) The Board of Directors should select 1 (one) .Imember of the Audit Committee to be Chairman

of the Audit Committee.

(ii) The Chairman of the Audit Committee should .Ihave a professional qualification or knowledge,

understanding and experience in accounting or

finance.

3.3: Reporting of the Audit Committee3.3.1: Reporting to the Board of Directors

(i) The Audit Committee should report on its .Iactivities to the Board of Directors.

(ii) The Audit Committee should immediately

report to the Board of Directors on the following

findings, if any:-

(a) Report on conflicts of interests; Not Applicable

(b) Suspected or presumed fraud or irregularity or Not Applicable

material defect in the internal control system;

(c) Suspected infringement of laws, including Not Applicablesecurities related laws, rules and regulations; and

(d) Any other matter which should be disclosed to

the Board of Directors immediately. Not Applicable

3.3.2 If the Audit Committee has reported to the Board of

Reporting to Directors about anything which has material impact Not Applicable

the Authorities on the financial condition and results of operation

and has discussed with the Board of Directors and

the management that any rectification is necessary

and if the Audit Committee finds that such

rectification has been unreasonably ignored, the

Audit Committee should report such finding to the

Commission, upon reporting of such matters to the

Board of Directors for three times or completion of

a period of 9 (nine) months from the date of first

reporting to the Board of Directors, whichever is

earlier.

3.4: Reporting to the Shareholders and General Investors

Report on activities carried out by the Audit .ICommittee, including any report made to the Board

of Directors under condition 3.3.1 (ii) above during

the year, should be signed by the Chairman of the

Audit Committee and disclosed in the annual report

of the issuer company.

4.00: External/Statutory AuditorsThe issuer Company should not engage its external/statutory Auditors to perform the following services of the Company

namely:

(i) Appraisal or valuation services or fairness .Iopinions;

(ii) Financial information systems design and .Iimplementation;

(iii) Book-keeping or other services related to the .Iaccounting records or financial statements;

(iv) Broker-dealer services; .I(v) Actuarial services; .I(vi) Internal Audit services; and .I(vii) Any other service that the Audit Committee Not Applicabledetermines.

Annexure-A09 (nine) meetings of the Board of Directors were held in the year 2011. Attendance of the Directorsis given below:

51. No. Name of Directors Number of Board RemarksMeeting attended

01. Mr. Zahid Hossain Khan 08 Pre-occupied and leave ofabsence was granted by theBoard

02. Mr. Sayem Ahmed 09 -

03. Mrs. Frey-Tang Yuen Mei, Barbara - Pre-occupied and leave ofabsence was granted by theBoard

04. Mr. Md. Fakhrullslam 08 Pre-occupied and leave ofabsence was granted by theBoard

05. Dr. Irshad Kamal Khan 06 Pre-occupied and leave ofabsence was granted by theBoard

06. Dr. Syed Fakhrul Ameen 06 Pre-occupied and leave ofabsence was granted by theBoard

07. Mr. Chowdhury M. Ashraf Hossain 08 Pre-occupied and leave ofabsence was granted by theBoard

08. Mr. Abedur Rashid Khan 01 01 (one) meeting was heldduring his period

09. Mr. K. Shamshi Tabrez 09 -

(Managing Director)

Annexure-BThe pattern of Shareholding of Dutch-Bangia Bank Limited as of 31 December 2011 as per SEe'sNotification No.SEC/CMRRCD/2006-158/Admin/02-08 dated 20 February 2006:

(i) Shareholding by Parent/Subsidiary/Associated Companies and other related parties: Nil

(ii) Share holding by :Directors Given in the notes to the financial statements (Note 16.5)Chief Executive Officer NilCompany Secretary NilChief Financial Officer NilHead of Internal Audit NilSpouse of above Executives Nil

(iii) Shareholding by Executives Nil(iv) Shareholders holding ten percent (10%) or more shares:

51. No. Name of the shareholders No. of shares as of 31 December 201101 Mr. Mohammed Sahabuddin Ahmed 44,424,650 shares = 22.21%02 Mr. Md. Abdus Salam * 33,333,330 shares = 16.67%03 M/s. Ecotrim Hong Kong Limited 49,471,880 shares = 24.74%

• Sub-judice

• To complete all documentation formalities in

the loan accounts and foreign trade, if any.

• To improve the deposit mix with a view to

bring down the cost of fund.

• To give emphasis on account opening, retail

and SME business.

• To take necessary actions for proper and

prompt delivery of ATM cards and cheque

books.

• Not to provide EOL without the approval of

the competent authority of the Bank.

• To complete Balancing / Breakup of GL

Heads.

• To check the daily activity reports of the

branches regularly.

• To complete the audit of the new branches

within 06 (six) months from the date of the

opening with a view to comply with the

irregularities at the early stage.

• To comply the Anti Money Laundering rules

and regularize the KYCprofiles.

• To define roles and responsibilities of all

officers of the Branch by making organogram

of the Branch.

• To prepare manpower planning of the

branches.

• To take necessary steps for removing the

anomalies between daily listing and

statement of affairs at the earliest.

• To maintain Departmental Control Function

Check List (DCFCL).

• To maintain fire proof safe custody for

ensuring security of documents.

• To complete affixing of stickers on the body

of the fixed assets of the Branches.

• To open accounts with proper documents

and complying all the rules and regulations

in force.

• To keep the maintenance cost register

against ATMs and list of ATM booths which

are not under AMC.

• To solve mismatches between physical cash

position of the ATM and the figure of cash at

ATM GL as per statement of affairs.

• To secure the vault room of the Branch.

• To obtain the network diagram and electric

diagram of the Branches.

• To strengthen the internal control system.

• To implement the Core Risk Management

Guidelines.

• To ensure necessary training arrangements

to the AROs for effective service.

• To regularize various lapses, irregularities in

general banking, foreign trade and credit in

the branches.

The Committee also reviewed the audited

financial statements as of 31 December 2010,

half-yearly financial statements as of 30 June,

2011 and quarterly financial statements as of 30

September 2011 of the Bank.

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

co-ordination between external Auditors and

Internal Control and Compliance Division for

continuous improvement of internal control

procedure and risk management system of the

Bank.

~Sayem AhmedChairmanAudit Committee of the Board