Govt in a fix over how to sack Yunus

New Age, 2 March 2011

Govt in a fix over how to sack Yunus

Abdullah Juberee and David Bergman

The Bangladesh Bank, the finance ministry and the law ministry are in conflict with each other about how to sack Muhammed Yunus from his position as managing director of Grameen Bank.
The finance ministry – following advice it received from the law ministry - asked Bangladesh Bank on Tuesday to use the powers set out in the Bank Company Act 1991 to force the removal of Muhammed Yunus from Grameen Bank.
‘We are not dealing with Grameen bank now. Bangladesh Bank is looking after the issue,’ Shafiqur Rahman Patwari, Secretary of Banking and Financial Institution Division, of Finance Ministry, told reporters at the ministry.
‘It has sufficient powers to take action.’
However, K. M. Abdul Wadood, the general manager of the Banking Regulation and Policy Department at Bangladesh Bank who is responsible for dealing with the current issue over Yunus’s employment, told New Age that the central bank does not have the powers to sack Grameen Bank’s managing director.
He said that the powers in the Bank Company Act 1991 which the government wants the Bangladesh Bank to use are not appropriate for dealing with employment issues of this kind.
Early on Tuesday, the finance minister, Abul Maal Abdul Muhith confirmed to journalists that his ministry had received a letter from Bangladesh Bank stating that Muhammad Yunus’s continued employment as managing director of Grameen Bank was illegal.
It was this letter which Muzammel Huq, the new chairperson of Grameen Bank, was reported to have placed before the meeting of its Board of Directors a day earlier, on Monday.
After that board meeting, Muzammel stated that, ‘By operation of law, [Yunus] has ceased to function as managing director.’
In response to this claim, Jannat-E-Quanine, general manager of Grameen Bank had issued a statement saying, ‘There is no directive on Professor Yunus to cease functioning as managing director, nor is there any suggestion of his being removed from this post.’
Muhith told reporters that, ‘The central bank does not even know about his continuation [as managing director of Grameen Bank]. Grameen Bank did not consult with [Bangladesh Bank] about the appointment. He does not exist as a [managing] director since 2001 to them.’
Under section 14 of the Grameen Bank ordinance, a managing director can only be appointed ‘with the prior approval of the Bangladesh bank’.
The decision by the finance ministry to send the matter back to Bangladesh Bank followed a meeting early on Tuesday morning between the law and finance ministry officials.
Finance ministry officials had brought to the meeting a proposal to change the law that would allow Yunus to be removed.
The law ministry officials however told their finance ministry colleagues that no legal amendments were necessary and that Bangladesh Bank could use its powers under section 45 of the Bank Company Act 1991 to force Yunus’s exit.
This section allows the Bangladesh Bank to issue any mandatory direction on any ‘banking company’ if it consider any one of four broad criteria exists.
These criteria include circumstances where the Bank considers it to be ‘in the public interest’ to issue a direction, or where it thinks that it should do so in order ‘to secure the proper management of any banking company’.
However, Wadood from the Bangladesh Bank told New Age that this section of the 1991 Act cannot be used in the way proposed by the finance ministry.
He said that it could only be used in relation to activities ‘where there is no existing regulations, laws or rules. It is not effective.’
‘The Grameen Bank Ordinance 1983 was created by the finance ministry. It is their responsibility to take action,’ he told New Age.
The government’s continued attempts to find a way to force Yunus out from Grameen Bank are occurring despite the US government ramping up its pressure on the Bangladesh government to back down.
New Age reported earlier in the week that US officials has told the prime minister Sheikh Hasina, that it would stop all high level diplomatic interaction with Bangladesh unless the government resolved the crisis amicably.
However, on Monday morning, following the normal cabinet meeting, a meeting took place at the cabinet division in the secretariat between the prime minister, Sheikh Hasina and the finance minster specifically to discuss how to force Muhammed Yunus out of Grameen Bank, senior finance ministry officials told New Age.