Banking loses ability to support financial sector

Central bank kowtows to foisted decisions, says CPD ED

FE REPORT | Published: May 18, 2024 23:04:03

Dr Fahmida Khatun

Bangladesh's banking system has lost its ability to support financial sector for a lack of transparency and accountability in an ambiance of foisted direction, says an economist.
"Whole banking sector has lost confidence of the depositors, which is a matter of concern," Dr Fahmida Khatun told a function Saturday, where entire gamut of latest banking situation, including forced mergers, came up for a critical review.
She said the central bank is unable to make decision independently and often implement "externally imposed" decisions.
Speaking at a mock parliament organised by Debate for Democracy (DfD) in city's FDC, the Executive Director of the Centre for Policy Dialogue (CPD) listed what have gone wrong, saying that absence of corporate governance is one of the major reasons behind bloated non-performing loans banks are panting under.
On recent move to merge weak banks with stronger ones, Dr Fahmida said the forced bank mergers without adequate preparation of the BB may not be sustainable.
"Bank mergers need to follow a process and require preparation. It should not be done hurriedly," she added.
The regulator should avoid forcing the banks to merge with each other, she suggests.
Also, those responsible for bank's ill financial health should be excluded from banks' management board.
She suggests conducting internal audit, public assessment and re-auditing before bank mergers as their operating procedures are different.
"People have lost faith in the banking sector due to lack of good governance posing uncertainty on their deposited money," she told the simulating parliamentarians, adding that those responsible for damaging the banking sector should be brought to justice.
Ensuring access to information for journalists in BB may help the government to find out loopholes and take corrective measures in banking sector's default loan, she added.
She mentions that developed countries have real-time data in central bank, which is not available in Bangladesh.
Dr Fahmida notes that a tie-up between politicians and businesses is not a healthy practice and often causes conflicts of interest. She said only 10 banks out of 61 are in a healthy financial condition.
Dr Fahmida recommends institutional and regulatory reform and structural reform. "Macroeconomic stability became fragile due to instability in banking sector," she said.
Coordinated efforts are needed as sporadic initiatives would not pay off.
DfD Chairman Hassan Ahmed Kiron also echoed Dr Fahmida's views, demanding free access of journalists to BB.
He placed ten-point recommendations that include forming independent banking commission, special tribunal to realize default loan, bringing loan defaulters under punishments through social ban and disclosure of their names, checking money laundering, separating bank ownership and management etc.
Mr Kiron chaired the debate competition between Bodrunnessa Government Women's College and Tejgaon College on 'Bank Merger Could Bring Positive Impact in Economy'.
Tejgaon College won the competition as opposition party in the mock parliament.
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