BB’s compliance dept: a good move

The Bangladesh Bank is all set to make a change in its organogram with the creation, as reported in this newspaper on Tuesday last, of a compliance department. This newly created department will be assigned the special duty of overseeing operations of banks and other financial institutions and their compliance of regulations. In that sense, it will serve as an enforcement organ on behalf of the central bank. The imperative behind constitution of such an enforcement branch comes from the blatant non-compliance of rules and regulations in sanctioning loans to corporate bigwigs or directors, chairmen of some banks. A staggering amount of Tk250 billion was exchanged, according to a report carried in a contemporary, between and among eight banks in reciprocal lending practices by 2023. Four of those also extended loans amounting to Tk200 billion to relatives of the directors. Such a devious practice of interbank loan sanctioning was evidently resorted to with an ulterior motive of skirting around legal provisions. The major portion of the total Tk 450-billion loan is suspected to have been siphoned off. No wonder, altogether 10 banks are, the white paper on economy finds, technically bankrupt.

Had there been regular monitoring of the shady loan disbursement and application of existing loan sanctioning criteria, the recipients of those would be declared ineligible. Their business practices and financial status or assets did not qualify them for the loans. Now much will depend on the operative mode of the BB compliance department. That the incumbent governor of the BB has come up with a clear idea of putting in place a set-up never done before in order to plug the loopholes through which customers' savings from banks are stolen by 'white collar' financial criminals is quite pragmatic. Yet this is no guarantee for bringing an end to such financial crimes. In a country where rules and regulations are aplenty but due to non-enforcement, every sector starting from road communication to health sector to management of domestic market is in dire straits, there is not enough reason to be particularly optimistic.

The interim government may have given its hundred per cent to introduce a system with the potential of curbing financial malpractices in banks and other financial institutions. But the government which takes over from it may not be as sincere and serious about keeping the system effective and transparent. Before any transformation of political parties which are likely to come to power, there is a need for a positive change in the mindset of people who matter. No system will be functional, let alone effective, if people with integrity are not at the helm of affairs. The bureaucracy is in the firing line but somehow they wriggle out of it. Bureaucrats are the ones who are lucky to have the cake and eat it too.

Without taking care of the politico-bureaucratic nexus which, despite comparatively much higher compensation package for service, does not set any enviable example of professional integrity for the rest of society. Rather, their corrupt practices breed corruption. Today's massive liquidity crisis in banks and the overall economic woes could not get this worse had the bureaucratic machine upheld the rules and regulations and made others to follow suit. The amount of unearned money siphoned off by corrupt bureaucrats is no less than those of corrupt political elements. On that count, they are to blame for spreading corruption culture and the rise in subsequent atrocious inequality in society. To ensure transparency in financial transactions, no matter the type, people in charge of banks and other financial institutions and the bureaucrats must perform honestly and ethically.