Banks can now award performance-based bonuses even if they do not fully meet standard eligibility criteria, as Bangladesh Bank eases rules to recognise special achievements.
The central bank issued revised guidelines on Tuesday, updating instructions introduced last December.
Boards will be allowed to approve incentive bonuses of up to one month’s basic salary for officers and employees in cases of special achievement during a financial year.
Bonuses must still be backed by operating profit in the relevant year, ensuring payouts are linked to actual financial performance.
Regulatory capital must not decline compared to the previous year, excluding adjustments related to previously approved deferred provisions, the Bangladesh Bank said.
Banks seeking to distribute such bonuses will not be allowed to apply for new provision deferral facilities.
Earlier rules barred bonuses based on accrued or unrealised income and required payouts to come from realised profits rather than retained earnings.
Banks were also required to have no capital or provisioning shortfalls and to link incentives with performance indicators such as loan recovery and operational efficiency.
The directive has been issued to managing directors and CEOs of all scheduled banks in Bangladesh.
