Atiur for policy, mkt reforms to bring in long-term savings

Bangladesh Bank (BB) Governor Atiur Rahman advised Saturday the senior bankers to ensure good governance in the country's banking sector by improving their internal control mechanism and compliance level.

"Pursuit of excellence in corporate governance will follow next; requiring adherence to proper credit appraisal, risk management and internal control processes in letter and spirit, free of vested interest influences of dominant director groups or colluding senior management functionaries," the central bank chief said while addressing as a chief guest at a national seminar on Banking "Future Vision" at a city's hotel Saturday.

The BB governor said the central bank expects the banks to adopt and adhere to higher risk management, corporate governance and risk management standards than the minimum regulatory requirement.

The BB governor also put emphasis on deepening life insurance penetration and widening of pension and provident fund coverage for meeting longer term funding gap.

He advised the government to introduce pension and provident fund schemes to minimise asset-liability maturity mismatch.

"It is high time for Bangladesh to go for earliest possible introduction of defined contributory pension and provident fund schemes for the general adult population," he observed.

He also said the only fiscal liabilities involved in defined contributory pension and provident fund schemes are the income tax waiver given on such savings, and the cost involved in running a pension and provident fund regulator's office.

"Redressing the longer term funding gap will require policy and market reforms to bring in new long term savings and to create alternative liquidity augmenting mechanism at the long term end," the BB governor noted.

Regarding financial globalisation, the central bank chief said the BB is looking forward to steadily increasing openness and integration of the country's financial markets with the global financial system, for widening cost effective access to investment resources from the global savings pool.

He also said hastening the adoption of international best practice standards in corporate governance, risk management, internal controls and financial disclosures will facilitate strengthening of correspondent relationships with reputed banks abroad.

Increasing external openness will bring in heightened exposure to volatility in global financial markets; risk management capacities in banks will therefore need to be upgraded and bolstered continually, according to the governor.

He also said Bangladesh economy has been continuing on sustained spell of six-plus percent real annual average gross domestic product (GDP) growth for more than a decade now with the latest score of 6.12 per cent in the fiscal year (FY) 2013-14.

Steady and incessant drive of inclusive growth is causing poverty to recede fast; GNI (gross national income) per capita has risen to US$ 1190 in FY14, with a continual uptrend," Dr. Rahman added.

"Our movement towards sustainable banking including financial inclusion ethos with green banking and mobile banking initiatives will continue further in the coming days; I will also welcome you to come forward with innovative new products to meet the appetite of future digital customers nourishing our future vision of full-blown financial digitisation," the BB governor noted.

Jan Vasko, managing director, risk solutions pte. Singapore, stressed minimising risk saying that credit risk management is key to managing earnings volatility and to growing business.

"Ignoring risk management is not a good idea," Mr. Vasko, also former managing director of the JP Morgan for ASEAN Countries and Regional Head of Asia Pacific of Moody's KMV (Moody's Analytics), said while presenting his key note presentation on "future of banking in emerging markets" at the seminar, organised by the Association of Bankers, Bangladesh (ABB).

He also said the banks will have to find new ways to assess and manage credit risk. "Bankers as well as directors have to think about the risk management."

Mr. Vasko found the level of poverty and unemployment / underemployment to be high in Bangladesh. "To become a middle income country by 2021, Bangladesh will have to grow at a sustained level of 7.5 to 8.0 per cent each year and ensure that the growth process is inclusive."

Such a growth target will require a significant increase in the investment rate to at least 33 per cent of GDP as well as to increase labour force participation and workers schooling, the expert said in his key note presentation.

"Banking is the most powerful tool in the economic growth of a country and we are putting our all possible efforts to improve the standard of leadership in the banking sector," Ali Reza Iftekhar, chairman of the ABB, an apex body of the country's banking professionals, said.

Nazrul Islam Mazumdar, chairman of the Bangladesh Association of Banks (BAB) and Mohammad Haider Ali Miah, managing director and chief executive officer (CEO) of the EXIM Bank Limited also spoke at the inaugural session of the seminar.

siddique.islam@gmail.com