2024-08-05 03:20:08
The central bank has given new instructions to the banks to strengthen the legal team in recovery of defaulted loans. The new guidelines also deal with the appointment of officers and panel lawyers in the legal team and how to conduct their annual evaluation.
On Sunday (August 4), Bangladesh Bank has issued instructions in this regard from the Banking Regulations and Policy Department.
According to the guidance, the role of legal department or legal team of the bank is very important in coordinating collection activities in the overall debt management. A significant portion of existing defaulted loans in the banking sector are under litigation in the money-loan courts. Against many defaulted loans the borrower has filed writ petitions in the High Court Division or Appellate Division of the Supreme Court. If the legal team of the bank is strengthened to take appropriate legal action, the pending cases can be disposed of quickly. As a result, on the one hand the defaulted loans of the bank will be recovered and on the other hand the financial capacity of the bank will increase. In such a context, it has been asked to follow the instructions to strengthen the legal team of the banks to implement the announced strategy roadmap for the banking sector of the country and to speed up recovery of defaulted loans.
Structure of Legal Department or Legal Team:
A Chief Legal Officer should be appointed under the direct supervision of the Managing Director or Chief Executive Officer of the bank. He will be responsible for formulating necessary policies, strategies and procedures for expeditious settlement of cases of delinquent loans. The Chief Legal Officer must hold a Bachelor of Laws (LLB) degree from a recognized university. Minimum 5 years working experience in legal team of bank or financial institution and minimum 10 years experience in related case management. Also, preference should be given to those with Bar-at-Law, Masters in Law (LLM), PhD degrees or higher degrees specializing in law.
Based on the number of cases pending in the Money Debt Court, High Court Division, Appellate Division and the amount of outstanding amount against it, the legal team should have the required number of skilled manpower. At least one-third of the legal team’s workforce should have law degrees and banking experience.
The progress report of pending cases should be submitted every month by the Chief Legal Officer to the Managing Director or Chief Executive Officer of the Bank. Every three months the legal team has to present the progress report of the case in the board meeting of the bank.
Eligibility for Appointment of Panel Lawyers:
Must have Bachelor of Laws (LLB) degree from a recognized university. Also, preference should be given to those with Bar-at-Law, Masters in Law (LLM), PhD degrees or higher degrees specializing in law. Should have membership of Bangladesh Bar Council or relevant Regional Bar Association. Preference should be given to skilled lawyers handling cases in Administrative Tribunals, Administrative Appellate Tribunals, High Court Divisions and Appellate Divisions of the Supreme Court.
Must have at least 3 years experience handling cases in Civil, Criminal, Bankruptcy Courts or Debt Courts. Preference will be given to lawyers with experience in representing banks and financial institutions in court proceedings, arbitration, mediation and alternative dispute resolution forums.
A lawyer convicted of a criminal offense for a term of 1 year or more shall not be eligible for panellisting. If any lawyer on the panel has been sentenced for a minimum of 1 year in a criminal case, the said lawyer shall be removed from the panel forthwith.
Performance Evaluation of Panelist Lawyers:
The performance of the lawyer included in the bank’s panel should be evaluated every year and during the evaluation, the amount and rate of case settlement, provision of appropriate and quality legal opinion at the scheduled time, the rate of court attendance and direct case management, maintaining communication with the related branch or office and other professional qualifications should be considered.
Islamic Shariah based banks will formulate their own policies in the light of the above principles to strengthen their recovery of defaulted investments. The Central Bank has issued this directive under the powers given in Section 45 of the Bank Companies Act, 1991. This directive will be effective immediately.