Why Are All Efforts to Correct the Banking System Hitting Hurdles?

 

A broad number of state-owned and private banks in Bangladesh have been plunged into an unfathomable abyss because of their failure to run their banks following statutory regulations and principles. Reportedly around 33 banks in the country have been dealing with their operational costs with money borrowed from Bangladesh Bank (BB) for last more than one year. It is a grim reflection of the fact that these banks have lost their financial standings and have reached the verge of becoming officially bankrupt. These unwholesome and scary circumstances have caused panic among general depositors and reliable sources have informed that a lot of ordinary people have already started withdrawing their deposited money from banks. The top functionaries of Janata Bank Limited declared around a month ago through an official press conference that their bank is no longer capable of disbursing fresh loans because they have failed to recover defaulted loans from most of their borrowers. And there is almost no hope that the defaulted credits will come back to the bank.

Not just Janata Bank Limited, many more state-owned and private banks are facing virtually similar perils and have started cutting down on their expenditures. Finance Ministry and Bangladesh Bank launched an initiative a few months ago to merge trouble-stricken banks to pull them out from their woes but the merger system has hit hurdles too because of vicious gambits, impediments and conspiracies by notorious scammers and fraudsters who have allegedly devastated the country's financial and banking sectors. In this situation, people all over Bangladesh are now highly worried about the country's economy in days to come which has already become shaky, according to financial connoisseurs.

The latest updates on Bangladesh Bank's website show that the sum of distributed loans has crossed the total amount of money circulated in the country's economic system. It has alarmed financial scholars and economists. A report by The Asian Age on the above striking phenomenon appeared on 3rd June 2024 titled "How Do Distributed Credits Exceed the Sum of Circulated Money: A criminalization process has trapped the banking system: Experts".

A persistent disorder in Bangladesh's banking system is the fact that most of the banks disburse loans without assessing the value of assets belonging to the borrowers. Big amounts of loans are being paid to immoral clients on the basis of zero value or zero assets, reportedly.

Reputed economists have told The Asian Age that a certain group of ill-motivated manipulators have gripped Bangladesh's banks and financial firms who are beneficiaries of the hardship and jittery plight banks have been going through. Financial scholars have strongly blamed regulatory authorities like Bangladesh Bank and Bangladesh Financial Intelligence Unit (BFIU) for their failure to take exemplary actions against the racketeers who have almost destroyed banks and have siphoned off uncountable amounts of money from Bangladesh to foreign countries through unauthorized channels. Thus the country's economic prospects have come under grievous threats, financial analysts have commented to The Asian Age.

Even allegations have surfaced that a certain portion of unscrupulous bureaucrats, business syndicators and camouflaged political malefactors are deliberately not supporting the government with required cooperation. As a result the government's policies and steps to streamline banks are collapsing again and again. This might be an attempt to disgrace the government's image at home and abroad, a few patriotic political analysts have remarked to The Asian Age.

A report headlined “BAB Chairman faces music with his bank in doldrums: Good governance, rule of law badly hindered” appeared in The Asian Age on 11 May 2022. Exim Bank Limited breached the regulations of Bangladesh Bank and Bangladesh Securities and Exchange Commission (BSEC) by appointing directors without seeking permission from the above regulatory institutions.

Bangladesh Bank sent notices to the Exim Bank Limited on 27 April 2022 seeking explanation over this breach of regulations within seven working days from the date of issuance of the letter. Bangladesh Bank has also mentioned that such regulatory breach by Exim Bank Limited hinders good governance, rule of law and sustainable development goals.

BSEC also sent a letter to Exim Bank (Ref: BSEC/CFD/225/2004/Part-5/302) which states “You are asked to explain your position regarding appointing independent directors who are related to the Chairman of the bank by holding positions in entities/companies under ownership and control of the Chairman. We also seek your explanation why the meetings held during this period in presence of unauthorized independent directors will not be declared as illegal and void”.

Financial experts told The Asian Age that the decisions taken by the unlawfully appointed directors were invalid. These unauthorized directors approved loans, took legal steps, made regulatory resolutions which will be considered nullified in light of the letter issued by BSEC. Questions have been raised about the decisions made by the illegally appointed board members for several years and how the regulatory institutions will act on these decisions. However, the regulatory authorities have not taken any further steps regarding the above matters. Exim Bank Limited apologized to BSEC but just an apology is no how enough in case of such a grim violation of banking code and ethics.


Nasir Uddin Shah is a Senior
Business Reporter of
The Asian Age.