NCEffective Insolvency and Creditor Rights Systems
The Bangladeshi insolvency regime is governed primarily by the 1997 Bankruptcy Act, supported by provisions of the Companies Act of 1994, the Banking Companies Act of 1991 (as amended), and the Finance Institution Act of 1993. The laws provide the mandate for money loan courts, bankruptcy courts, and dedicated courts that handle the recovery of debts for banks and other financial institutions. However, the U.S. Department of Commerce's 2007 Country Commercial Guide noted that this legislation is largely ineffective in addressing insolvent companies. Banks prefer alternatives to the bankruptcy courts, including demanding blanket guarantees from company directors as a condition for issuing loans. Implementation of creditor rights is weak. According to the World Bank's Global Insolvency Law Database, Bangladesh is a participant in the Forum on Asian Insolvency Reform (FAIR), a pan-Asian organization dedicated to addressing the fundamental weaknesses in insolvency law in the region. In its fifth meeting, in 2006, FAIR participants began discussion of a proposal to create an online regional network designed to facilitate sharing of information regarding insolvency reforms as they occur across the region. The 2009 "Doing Business Guide" produced jointly by the International Bank for Reconstruction and Development and the World Bank noted that no reforms dealing with business closing issues were slated to be enacted in 2009.
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IDInternational Financial Reporting Standards
A 2003 World Bank review of the accounting and auditing environment in Bangladesh noted that national practices were not in line with internationally acceptable standards and suffered from "institutional weaknesses in regulation, compliance, and enforcement of standards and rules." The World Bank therefore recommended improving the accounting and auditing framework by adopting International Financial Reporting Standards (IFRSs) without any modifications and setting up an independent oversight body for enforcing international standards. As part of its efforts towards convergence, per Deloitte IAS Plus website, as of 2007 the Institute of Chartered Accountants of Bangladesh (ICAB) adopted 31 IFRSs as Bangladesh Accounting Standards. These standards, however, are based on an older version of IFRSs. In 2008, according to the ICAB website, Bangladesh adopted an additional four new IFRSs. The national standards are mandatory for all listed companies and recommended for other entities. In a 2009 ICAB Action Plan, the Institute reiterates its commitment to convergence and makes clear that it will be adopting international standards on an ongoing basis. The ICAB Action Plan also adds that it is in the process of reviewing its educational requirements and strategies with regard to IFRS dissemination and training.
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IDPrinciples of Corporate Governance
A 2008 Asian Development Bank (ADB) Improvement of Capital Market and Insurance Governance Project program administration memorandum notes that despite recent improvements, Bangladeshs capital market is still underdeveloped and weaknesses in corporate governance persist. The Bank also points to "inadequate market supervision" as one of the key problems. A 2009 paper by Javed Siddiqui published in the Journal of Business Ethics further explains that the corporate sector in Bangladesh is characterized by high ownership concentration, lack of shareholder involvement and reluctance on the part of the investor to raise capital through the stock market. Efforts to improve corporate governance, however, are being made at various levels. Since 1999, the ADB has been involved in a project (which is scheduled to be completed in 2009) to strengthen the capacity of the Securities and Exchange Commission (SEC), the Bangladeshi capital market regulator. In 2003, the Bangladesh Enterprise Institute (BEI), a donor-funded private sector think-tank developed a code of corporate governance. Furthermore, the SEC issued an order on corporate governance to be implemented on a comply-or-explain basis by listed companies in 2006. Among other initiatives, the BEI, in partnership with the United States Agency for International Development is currently involved in a project on Promoting Governance, Accountability, Transparency, & Integrity to be completed in 2012 and has also been conducting several training programs on corporate governance.
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ENInternational Standards on Auditing
According to a 2009 Institute of Chartered Accountants of Bangladesh (ICAB) Action Plan prepared as a part of the International Federation of Accountants' Member Body Compliance Program, Bangladesh adopted an official position on convergence to International Standards on Auditing (ISAs) issued by the International Auditing and Assurance Standards Board (IAASB) back in 1998. In the subsequent years, Bangladesh aligned its agenda with that of the IAASB and based Bangladesh Standards on Auditing (BSAs) on ISAs. However, a 2003 World Bank assessment pointed out that although the BSAs were based on ISAs, the national standards had not been updated in line with the international standards. Furthermore, the World Bank noted that Bangladesh suffered from "institutional weaknesses in regulation, compliance, and enforcement of standards and rules." The assessment therefore recommended improving the accounting and auditing framework by adopting ISAs without any modifications and setting up an independent oversight body to enforce international standards and codes. As part of its efforts towards maintaining international harmonization, the 2009 ICAB Action Plan states that in December 2008, the ICAB converged local standards with the new and updated Handbook of Standards on Auditing, Assurance and Ethics pronouncements Volume 1 issued by the IAASB. Furthermore, in November 2008, the ICAB adopted its own clarity project to redraft national standards in line with the clarified ISAs. The ICAB expects completion of its clarity project by December 2009. The ICAB is also updating its educational courses and training programs to assist with the implementation of the new and revised standards.
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IIAnti-Money Laundering/Combating Terrorist Financing Standard
A 2009 U.S. Department of State (DoS) report notes that despite positive developments, weaknesses persist in the anti-money laundering and terrorist financing regime in Bangladesh. The World Bank in a 2003 report had pointed out that the major challenges facing anti-money laundering (AML) efforts in Bangladesh include: building capacity for better identification and investigation of money-laundering offenses; establishing a Financial Intelligence Unit (FIU); building expertise of the Anti-Corruption Commission and the Police Department in tracking down money laundering crime chains; and creating awareness in banks and other financial institutions for AML measures. Some of these issues have since been addressed. For instance, in 2008, the government of Bangladesh enacted the Money Laundering Prevention Ordinance (MLPO) and the Anti-Terrorism Ordinance (ATO) in order to further strengthen its legal framework. The new ordinances also facilitate international cooperation in recovering money illegally transferred to foreign countries and mutual legal assistance for criminal investigation, trial proceedings, and extradition matters. Furthermore, the 2009 U.S. DoS report observes that in May 2007, the government of Bangladesh identified the Central Banks Anti-Money Laundering Department as the FIU. However, the DoS report points out that the FIU analysts need to enhance their ability to conduct analysis, investigations and gain a deeper understanding of anti-money laundering and anti terrorist financing measures. The U.S. DoS also notes that Bangladesh law enforcement has not made sufficient progress in pursuing money laundering investigations because of the lack of inter-agency cooperation. Rampant corruption and widespread use of hawala for money laundering further exacerbate the situation. The Asia/ Pacific Group on Money Laundering is expected to complete a mutual evaluation of Bangladesh against the Financial Action Task Force's 40+9 recommendations in the near future.
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IDCore Principles for Systemically Important Payment Systems
As noted in the Bangladesh Banks (BB) 2007-2008 Annual Report, Article 26 of the Bangladesh Bank Order of 1972 empowers the Bank to issue notes and coins, and manage currencies in circulation. Article 7(A) of the same Order grants the BB the authority to regulate payment systems. The Bangladesh Bank serves as the country's central bank, motivated by its interests in a stable currency and financial system and the smooth operation of monetary policies. The 2007-2008 Annual Report acknowledges that the existing payments and settlement systems in Bangladesh do not conform to international practices. However, the same report states that the central bank is committed to modernizing these systems, along with the accompanying legal and regulatory framework. Included in the modernization plans are the implementation of a real-time gross settlement system, the formation of enhanced clearing houses for both checks and electronic payments, the issuance of modern check design standards, and the expansion of the use of contemporary and innovative payment instruments like credit and debit cards, point-of-sale-systems, and high-value interbank payments. The expected completion date of the project is mid-2009, and it promises to make Bangladeshs payment systems conform to international standards. Moreover, the Bangladesh Bank, commenting on the country's reform process notes that the authorities are moving towards developing a safe and efficient payment system that is compliant with the Committee on Payment and Settlement Systems' Core Principles for Systemically Important Payment Systems.
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