What Competencies Should Directors Possess in Banking Sector? Bangladesh Perspective

The direct linkage of banks with the economic system of a country and the nature of the banking business makes their corporate governance more complex. Competencies of the board of directors, such as knowledge, skills, and charismatic characteristics, help them handle their responsibilities and increase their ability to manage the complexity and changing situations. Also, the directors must gain the skills and knowledge to keep up with the rapidly changing world to increase their competitive advantage. The complexity of the banking business requires specific mechanisms to deal with, increases the asymmetry of information, and diminishes stakeholders’ capacity to monitor managers’ decisions. In Bangladesh, the banking industry requires competent and professionally skilled directors in board composition for the effective board process. Therefore, the paper aims to examine the board competencies in the Bangladeshi banking sector that directors should possess to contribute to the board process for effective governance. In rigorous literature, governance guidelines, and best practices review, the paper finds the required core board skills, knowledge, experiences, education, and training regarding enterprise leadership, governance, industry, and strategies. The study findings have several managerial implications. The study is helpful to policymakers in developing regulatory requirements for board composition and competencies in the context of a specific industry. Moreover, all stakeholders of listed companies, particularly shareholders, regulators, and existing and prospective board members, could use this study for the diversity in directors’ competencies to align strategic goals.

Keywords: Board competencies, board effectiveness, board governance, banking sector, organizational goals.