BB introduces 100-point performance framework for bank MDs

Bangladesh Bank (BB) has introduced a new 100-point performance evaluation system for Managing Directors (MDs) and Chief Executive Officers (CEOs) of banks, making management of bad loans, capital adequacy, governance and financial stability key benchmarks for assessing their performance.
The central bank issued a circular on Sunday outlining the new framework as the banking sector continues to face mounting challenges from high non-performing loans (NPLs), weak asset quality and governance concerns.
Under the framework, the performance of bank MDs and CEOs will be assessed across five broad areas — solvency and liquidity, asset quality, profitability, governance and internal control, and financial inclusion, customer service and market conduct.
Of the total 100 marks, solvency and liquidity will account for 25 points; asset quality 25, profitability 10, governance and internal control 25, and financial inclusion, customer service and market conduct 15 points.
An MD or CEO securing 75 or more points will be classified as “Above Average,” while a score of 65 to below 75 will be considered “Average.” A score below 65 will be rated “Below Average,” requiring immediate improvement.
The new system places considerable weight on the ability of bank management to contain and recover bad loans.
Under the framework, individual banks will set performance targets for gross and net NPL ratios, stressed assets, provision coverage, concentration of large loans and recovery of classified and written-off loans.
The framework also provides for additional deductions from the overall score if banks fail to meet minimum targets on a number of critical indicators.
A failure to achieve at least 50% of the predetermined targets relating to the advance-deposit ratio, gross or net NPLs, large-loan concentration, loan recovery and financial inclusion will attract penalties in the performance assessment.
Bangladesh Bank will also closely monitor banks’ capital and liquidity positions. The relevant indicators will include capital adequacy, core capital, liquidity coverage, stable funding and the advance-deposit ratio.
Governance and internal control will be assessed on a range of issues, including compliance with regulatory requirements, anti-money laundering measures, risk ratings, reporting practices, ICT and cyber security risks and leadership.
According to the circular, the board of directors of each bank will be responsible for setting performance targets for its MD or CEO and calculating the final score. Bangladesh Bank will approve the targets and review the assessment results.
The boards have been instructed to set targets for existing MDs and CEOs within one month of issuance of the circular. The targets will cover three years or the remaining tenure of the incumbent, whichever is shorter.
The first assessment period under the new framework will cover October 1, 2026 to March 31, 2027.
The initiative is expected to strengthen accountability at the top management level and encourage bank executives to give greater priority to reducing bad loans, improving asset quality and strengthening corporate governance.