[🇧🇩] Banking System in Bangladesh

[Saif]

No special liquidity for ailing banks

Bangladesh Bank will no longer try to save any ailing bank by providing it special liquidity support, said Governor Ahsan H Mansur yesterday.

www.thedailystar.net

No special liquidity for ailing banks
BB governor says

Bangladesh Bank will no longer try to save any ailing bank by providing it special liquidity support, said Governor Ahsan H Mansur yesterday.

The central bank has suspended its special liquidity support for some Shariah-based banks, he said at a press briefing after meeting with a delegation of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) at the latter's office yesterday.

Seven banks, including six Shariah-based banks, have been facing a deficit in their current account balance with the central bank for more than a year.

The central bank was keeping those banks alive by providing special liquidity support. Only one recently showed signs of recovery.

Seven banks, including six Shariah-based ones, have been facing a deficit in their current account balance with the central bank

As of August 7, the remaining six lender's current account deficit with Bangladesh Bank stood at Tk 14,621 crore. However, the combined shortfall is Tk 20,774 crore if their cash reserve ratio deficit is considered, as per central bank data.

The ailing banks are National Bank, First Security Islami Bank (FSIBL), Social Islami Bank, Union Bank, Global Islami Bank and Bangladesh Commerce Bank.

Chattogram-based conglomerate S Alam Group has controlling stakes in all of these banks, except for National Bank.

Mansur said the banking regulator has already capped the lending activities of the six banks.

Replying to a question, Mansur said depositors have the right to withdraw money from the ailing banks, which would be liable for losing the confidence of their clients.

Against this backdrop, he said neither closing the banks or providing liquidity support was a solution.

Journalists also questioned how S Alam Group was allowed to control and take advantage of some weak Shariah-based banks.

In response, Mansur said the central bank has taken initiatives to prevent the withdrawal of funds by people who were responsible for ruining the financial health of these banks.

He added that a banking commission would soon be formed and the weak banks would have to cut down on their operations or merge with other banks under the banking commission, he added.

The new central bank governor also said the guilty or ill-motivated people would be caught but no business would be targeted.

"Action will be taken if any official, irrespective of the organisation, is found responsible," he said, adding that the same applies for central bank officials as well.

Regarding the ongoing inflationary pressure, Mansur said the inflation rate would come down to around 5 to 6 percent within the next seven to eight months.

The central bank will increase the policy rate until the inflationary pressure begins to decline, he added.

The business delegation led by FBCCI President Mahbubul Alam included former FBCCI president and BNP Vice Chairman Abdul Awal Mintoo, BKMEA Executive President Mohammad Hatem and Metropolitan Chamber of Commerce and Industry President Kamran T Rahman.

The businesspeople present demanded punishment for people who scammed and looted banks in the pretext of doing business.

At the meeting, FBCCI President Alam urged to stabilise the interest rates on bank loans, ensure adequate US dollar supply and provide support to affected industries and commercial establishments.​

 

[Saif]

Bangladesh Bank suspends Nagad's digital banking licence

Bangladesh Bank (BB) has suspended the digital banking license granted to mobile financial service (MFS) provider Nagad as it would start a review of the licencing procedure, central bank governor Dr Ahsan H Mansur said on Thursday. “The Nagad digital banking licence has been put on hold whi

thefinancialexpress.com.bd

Bangladesh Bank suspends Nagad's digital banking licence
FE ONLINE REPORT
Published :
Aug 22, 2024 19:11
Updated :
Aug 22, 2024 19:22

Bangladesh Bank (BB) has suspended the digital banking license granted to mobile financial service (MFS) provider Nagad as it would start a review of the licencing procedure, central bank governor Dr Ahsan H Mansur said on Thursday.

“The Nagad digital banking licence has been put on hold while we conduct a thorough review,” Dr Mansur said during a briefing at the BB headquarters. “If Nagad meets the requirements after the review, the licence will be reinstated. Until then, it remains suspended.”

The central bank awarded the digital banking licence to Nagad in October last year. However, there have been allegations that the MFS service-providing entity availed the licence bypassing the existing rules following interventions by two influential persons linked to the recently ousted Awami League-led government.​

 

[Saif]

Banking reform must set its priorities right

Findings on the country's financial sector, in particular banking sector, by the Centre for Policy Dialogue (CPD) are believed to significantly help the interim government resuscitate the country's ailing banking sector. During a press conference last week titled "Bringing Discipline in the Banking

thefinancialexpress.com.bd

Banking reform must set its priorities right
Wasi Ahmed
Published :
Aug 20, 2024 21:15
Updated :
Aug 21, 2024 21:04

Findings on the country's financial sector, in particular banking sector, by the Centre for Policy Dialogue (CPD) are believed to significantly help the interim government resuscitate the country's ailing banking sector. During a press conference last week titled "Bringing Discipline in the Banking Sector: What Should be Done Immediately," the think tank while highlighting shocking irregularities by some bank owners right under the nose of the former government, offered suggestions on some critical areas for the government to consider.

A key aspect of CPD's analysis is its challenge to long-held perceptions that were seen as vital to maintaining the banking sector. One such is allowing moribund banks to continue and not die, by injecting taxpayers' money. The CPD dismissed the notion saying banks that are "clinically dead" and surviving only through bail-outs, should be closed down. The interim government, it said, should formulate an exit policy focusing on protecting depositors' money. One may recall that years ago, then finance minister late M. A. Muhit was seen not only justifying but visibly flaunting the 'glory' of keeping dying banks afloat as a state responsibility. It's time the government took a decisive move in this direction.

That the banking industry is plagued with non-performing loans (NPLs) for decades is pretty well known. All that the former regime did was reschedule loans in a manner to suit the big loan defaulters. However, the actual figure relating to NPL varied. CPD's calculation says that during 2008-2023, Tk 92.26 billion, equivalent to 12 per cent of the national budget of FY24 or 2.0 per cent of the GDP of FY23, was embezzled in 24 major banking scams. Citing an example of misdirection in banking and finance, the CPD pointed out that a single corporation gained control over seven private commercial banks in 2017. It said, quoting news reports, that S Alam Group took out about Tk 30 billion in loan from Islami Bank Bangladesh Ltd in 2022. According to the Bangladesh Bank roadmap for reducing NPLs, released to the media in February 2024, 72,543 cases were pending with the Money Loan Court, with an outstanding amount of BDT 178.27 billion.

There are innumerable instances, though not of such gigantic scale. Citing them will only make the list longer, and present a chilling picture of how outrageously errant could the banking sector be in the grip of the embezzlers. Clearly, it is the Banking Company Act that lent support to keep them going. In this connection the CPD said the Act should be amended so that there is only one member from one family on the board of directors, and the tenure of each director should be limited to 3 years, with each director allowed to serve a maximum of two terms in their entire lifetime. A single individual or group of individuals should not be allowed to obtain majority ownership of more than one commercial bank. Also, if one company in a group of industries defaults on loan repayment, companies in the same group of industries should not be allowed to take new loans.

Some corrective measures were also suggested that the think tank considered should be in place in respect of governance. One such is the shutting down of the Financial Institutions Division (FID) of the Ministry of Finance (MoF). "The mandate of the Financial Institutions Division (FID) is directly contradictory to the Bangladesh Bank Order 1972 (P.O. No. 127 1972) since it allows FID to exercise its authority to oversee Bangladesh Bank's governance" said CPD Executive Director Fahmida Khatun.

The think-tank while criticising the approval of licences for nine new private banks granted to politically influential owners by the previous regime, urged that no further bank licences be issued on political grounds without a thorough assessment of the economy's needs. On the issue of illicit financial flows, the CPD called for strengthening the Bangladesh Financial Intelligence Unit (BFIU) to prevent illegal outflows and reentry of laundered money, which would destabilise the interim government or cause unrest. Another issue that the think tank stressed upon was timely data availability, urging that reports and data on individual banks and financial institutions be published regularly and made publicly accessible. It also recommended that all commercial banks comply with mandatory BASEL III disclosures in a timely manner. The Bankruptcy Act should be amended to include corporate bankruptcy and cross-border bankruptcy following the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross-Border Insolvency.

At this critical juncture, one crucial step that cannot be overstated, as highlighted by the CPD, is the urgent need for publication of a comprehensive white paper. This document should meticulously detail all instances of scams and corruption, clearly identifying both the underlying causes and the individuals responsible. Such transparency would not only pinpoint past misconduct but also pave the way for greater accountability in the future, including the establishment of an independent Banking Commission to oversee the sector. In this context, it is particularly pertinent to revisit the infamous Bangladesh Bank heist of February 2016, where hackers made off with a staggering sum of money. Many believe that this incident was never thoroughly investigated, possibly due to efforts to shield those who were negligent in their duties. The failure to properly address this scandal has left lingering doubts about the commitment to transparency and accountability within the financial system. By addressing these issues head-on in the white paper, the authorities could finally confront the systemic flaws that have allowed such incidents to occur, thus restoring public trust and ensuring that similar breaches of security and ethics do not happen in the future.​

 

[Saif]

UK keen to help Bangladesh reform banking, revenue sectors

The United Kingdom (UK) has expressed their keen interest to help Bangladesh reform its banking and revenue sectors alongside the capital market. The interest surfaced as the UK High Commissioner to Bangladesh Sarah Cooke called on Finance Adviser to the interim government Dr Salehuddin Ahmed at h

thefinancialexpress.com.bd

UK keen to help Bangladesh reform banking, revenue sectors
BSS
Published :
Aug 27, 2024 12:59
Updated :
Aug 27, 2024 15:27

The United Kingdom (UK) has expressed their keen interest to help Bangladesh reform its banking and revenue sectors alongside the capital market.

The interest surfaced as the UK High Commissioner to Bangladesh Sarah Cooke called on Finance Adviser to the interim government Dr Salehuddin Ahmed at his Economic Relations Division (ERD) office in the city on Tuesday.

After the meeting, the finance adviser said the UK is willing to help Bangladesh reform sectors like banking, revenue and capital markets.

"Those are very immediate concerns for us also. Because, unless we carry out those reforms it would be difficult for us," he told reporters after the meeting.

The adviser said they have discussed enhancement of trade and commerce between the two countries.

"We want that the trade and commerce should flourish. The UK government was very helpful in the past and I hope that they will be helpful in the coming days as well. We are looking forward to their help and cooperation," he said.

The finance adviser and the British envoy also discussed the cooperation between Bangladesh and the UK.

Dr Salehuddin mentioned that the UK is working mainly in economic development and women's empowerment, adding, "We will continue those as well. Private sector investment is also very much important. Big business houses of Britain have invested here," he added.

The adviser said that he told them to diversify the import items from Bangladesh as his country mainly exports RMG items to the UK and the European countries.

He also said that Bangladesh will have to improve the business environment to attract more private investment.

"For that, the condition is to make business environment, ease doing business that means we have to fix the climate of doing business, otherwise private sector will not come," he said.

Mentioning that the discussion was very fruitful, the British high commissioner said the UK and Bangladesh had a very strong economic, trade and investment relations.

"We're very keen to expand our trade and investment ties and we also discussed how the UK can support the economic reforms in Bangladesh that the adviser is leading and how we may jointly work to bring our experts together to discuss the issues of economic reform and also how we can boost our trade and investment ties between the two countries,"

Responding to a question on mobilizing more FDI from the UK, she said that the UK has a very strong partnership with Bangladesh.

"We've a very strong and investment environment. Off course, we would like to see more FDI into Bangladesh," she added.

The envoy said the British investors for sure are responsible investors, adding, "I discussed with the adviser how we can build investors' confidence and strengthen our trade and investment ties."

Replying to another question, Sarah Cooke said she also discussed the economic reforms that Bangladesh was prioritizing and how the UK can support Bangladesh in this regard.​

 

[Saif]

Fixing boards of ailing banks is first step for good governance

Reconstituting the board of directors of ailing banks is the first step towards bringing good governance and discipline to the banking sector, according to Bangladesh Bank Governor Ahsan H Mansur.

www.thedailystar.net

Fixing boards of ailing banks is first step for good governance
BB governor says in interview

Reconstituting the board of directors of ailing banks is the first step towards bringing good governance and discipline to the banking sector, according to Bangladesh Bank Governor Ahsan H Mansur.

The country's central bank has already reconstituted the board of some banks in which S Alam Group held a majority stake, Mansur said in a recent interview with The Daily Star.

The eminent economist was appointed as governor of the Bangladesh Bank on August 14. He replaced Abdur Rouf Talukder, who stepped down from the post following the ousting of the Sheikh Hasina-led Awami League government on August 5.

Of the banks with reconstituted boards, S Alam Group held a roughly 80 percent stake in Islami Bank Bangladesh, Social Islami Bank, Global Islami Bank and Union Bank.

The central bank governor said they will take over the shares of S Alam Group against its liabilities to these banks in order to sell them and return depositors' funds.

The boards of two other lenders -- National Bank and United Commercial Bank -- were also reformed.

Mansur informed that, in most cases, they are reconstituting the preliminary board of ailing banks. Regarding the selling of S Alam's shares, he said this would allow new sponsor directors to come to the boards.

"The new sponsor directors could be from home or abroad. Shares will be available for all investors," Mansur added.

However, the central bank governor also said they will ensure that only fit and proper people assume the post.

"Honest people with strong financial condition are needed as sponsor directors for ailing banks," he said. "We will go after the assets of borrowers or directors like S Alam if needed."

Regarding the recovery of laundered money, Mansur said the Bangladesh Bank and other related authorities will speak with counterparts abroad to bring back the funds.

"We will also seek support from the World Bank," he added, informing that the US government was interested in helping in this regard.

"We will not give up anything we can recover."

Furthermore, Bangladesh is already in talks with the International Monetary Fund (IMF) and other multilateral agencies for additional loans.

"We are thinking about foreign loans to create some breathing space and have discussed with the IMF to access their funds," Mansur said.

Bangladesh is also holding discussions with the World Bank for additional budget support, sectoral support lending or programme lending.

"Additionally, we have started talking with the Asian Development Bank (ADB) and are hopeful that the multilateral lenders will allow funds to help rebuild our forex reserves," Mansur added.

The country's foreign exchange reserves stood at $20.48 billion as per the IMF calculation on August 21, showed central bank data.

The forex reserves have been falling for the last three years as the outflow of foreign currencies exceeded inflow.

Regarding the country's economic situation, the Bangladesh Bank governor said the first problem is cost disruption while the second is flooding across the country.

"The country is facing lots of supply chain disruptions that we cannot control. We can only try to control the demand side. And the new government is trying to do that."

Mansur also said bank interest rates have been market-driven since May as prescribed by the IMF and various economic experts.

The former government was forced to remove the single-digit ceiling on interest rates and allow them to be market-driven while also doing the same for foreign exchange rates.

The forex market has become more stable since then, he said. "I am hopeful that exchange rate stability will prolong as global commodity price shocks are not there."

Regarding remittances, Mansur said the inflow is positive and they will see if it sustains in coming days.

"Remittance inflow in the first 20 days of this month is much higher compared to the same period last year," he added.​