Bangladesh Bank Lets BRAC Bank's Biggest Shareholder Triple Its Board Seats

Bangladesh Bank has relaxed a long-standing board rule for BRAC Bank, allowing its largest shareholder to appoint up to three representative directors instead of just one. The central bank issued the exemption through a circular on 12 October, using powers under Section 121 of the Bank Company Act, 1991, to waive part of Section 23(1)(kakaka) of the same law specifically for BRAC Bank.

• BRAC, which a Bangladesh Bank official said owns 46 percent of BRAC Bank, can now appoint up to three board directors instead of one
• The exemption is specific to BRAC Bank; no single institution anywhere in the banking sector may appoint more than three
• It follows a similar, separate exemption Bangladesh Bank gave Trust Bank in March for its sole sponsor, the Army Welfare Trust
• The move comes weeks after the central bank separately eased its family-control limits for bank boards sector-wide

The rule that was holding BRAC back

Section 23(1)(kakaka) of the Bank Company Act generally caps any single institution or company shareholder at one representative director on a bank's board, regardless of how large its stake is. For BRAC, the nonprofit organisation that holds 46 percent of BRAC Bank's shares according to a Bangladesh Bank official, that meant a near-majority stake came with exactly the same single board seat available to a shareholder holding a fraction of that amount. The new circular, issued on 12 October, uses the central bank's waiver power under Section 121 to let BRAC appoint up to three representative directors, while keeping the cap at three for anyone else as well.

Not the first time Bangladesh Bank has made this kind of exception

BRAC Bank is not the first lender to receive this type of relief. In March, Bangladesh Bank exempted Trust Bank PLC from the same restriction so its sole sponsor shareholder, the Army Welfare Trust, could appoint more than one director, as The Daily Star reported at the time. In that case, a senior central bank official explained the exemption was justified because Trust Bank has only one sponsor shareholder, an unusual structure compared with most banks, which typically have several. BRAC Bank's case is different in the details, since BRAC is not Trust Bank's only shareholder, but the underlying logic is similar: regulators appear willing to grant a bigger shareholder a board presence that better matches the size of its stake, on a case-by-case basis rather than through a blanket rule change.

The timing is also notable. BD Financial Review reported earlier this month that Bangladesh Bank had already softened its broader family-control rules for bank boards sector-wide as part of an 18-month plan to address bad loans. The BRAC Bank exemption suggests regulators are willing to adjust board composition rules on multiple fronts at once, both the limits on how many family members can sit on a board and, separately, how many seats a single large institutional shareholder can hold.

Old rule versus new exemption

	Standard rule (Section 23(1)(kakaka))	BRAC Bank exemption (12 October circular)
Representative directors per institutional shareholder	Maximum of one	Up to three
Applies to	All banks, all institutional shareholders	BRAC Bank only, capped at three for any single institution
Legal basis	Bank Company Act, 1991, Section 23(1)(kakaka)	Waiver under Section 121 of the same Act

A senior Bangladesh Bank official, commenting on the earlier Trust Bank case, noted that most banks have multiple sponsor shareholders, making single-director caps less restrictive in practice than they are for a bank like BRAC Bank, where one shareholder holds a near-majority stake.

Why regulators are handling this bank by bank

Bangladesh Bank could, in theory, rewrite Section 23(1)(kakaka) itself to tie the number of allowed representative directors to the size of a shareholder's stake across the whole sector. Instead, it has twice now chosen to grant narrow, bank-specific exemptions, first for Trust Bank's unusual single-sponsor structure, and now for BRAC Bank's concentrated 46 percent holding. That case-by-case approach gives the regulator more control over each decision and avoids opening the door to every large shareholder in the sector demanding the same treatment automatically, but it also means similarly positioned shareholders at other banks will likely need to apply for their own exemptions rather than benefit from a blanket rule change.

What it means for you

For BRAC Bank depositors and borrowers, a board seat change rarely affects day-to-day banking directly, but it is a reminder that major shareholders are strengthening their formal say over strategy, lending priorities, and risk appetite at a bank many households and small businesses already use for savings and loans. If you hold a fixed deposit or DPS account with any bank going through a governance change like this, it is generally still protected by the same deposit rules that apply across all scheduled banks, but it is reasonable to keep an eye on the bank's disclosures over the coming months.

For minority shareholders of BRAC Bank or of other listed banks, the exemption is worth watching as a precedent. It signals that Bangladesh Bank is open to letting a dominant shareholder's board representation scale with its ownership stake on a case-by-case basis, which could matter if you hold shares in a bank with a similarly concentrated ownership structure and are trying to anticipate how its board might evolve.