No chances of meltdown in the banking industry are there as the central bank takes remedial package measures to stabilise the distressed commercial banks, the Bangladesh Bank governor said Monday to dispel doubts.
Dr Ahsan H Mansur admits there are some banks reeling from serious liquidity crunch following massive-scale loan-related irregularities during ousted Prime Minister Sheikh Hasina's regime but they are overcoming the crisis through cash feeding without compromising the macroeconomic stability.
"So, there will be no meltdown in the banking sector as we have stabilised it," the central bank governor told his audience while speaking as a guest of honour at the Third Bangladesh Economic Summit hosted by Bonik Barta, a Bengali business daily, at a city hotel.
Regarding bailout of the struggling banks, he said the banking regulator plans to initiate bank-resolution act that will allow them to legally apply correctional options like mergers and acquisitions, liquidation, recapitalisation and consolidation.
Citing what happened in Islami Bank as an example, he said one family holds 80-percent share of the country's largest unconventional bank and they left the country but the shares were blocked shortly after changeover in state power following the recent mass uprising.
"We need investors for the blocked shares and the act will have criteria regarding nature of the investors. We'll soon place the act with the interim government," he told the meet.
About bringing back the stolen assets of the banks, Mr Mansur said representatives from the US treasury office, US justice department and Intelligence and Security Committee of the British government would visit Bangladesh next week and engage in separate parlays with the central bank to this end.
"We'll have a roadmap of recovering stolen assets through bilateral agreement following international process," he said.
About controlling inflationary pressure, the BB governor said they had analysed inflation-containing measures of various countries all over the world and found that it takes at least 12 months to bring down inflation to a desired level.
He said Bangladesh started interest-rate liberalization in June last by the Sheikh Hasina regime following pressure of the International Monetary Fund (IMF). "It's been four months only, give us another eight months and we'll be able to cut inflation below 6.0 per cent."
Speaking as a distinguished panelist, Chairman of The Association of Bankers Bangladesh Limited (ABB) Selim R.F. Hussain said the banking sector had passed through a critical time over the last 15 years witnessing waves of "tsunami of corruption" in the industry.
"But the good point is the wave is being prevented and the much-needed respite started returning in the sector riding on prudent policy measures taken on interest-rate and exchange-rate regimes by the regulator," he said.
Mr Hussain, also managing director and chief executive officer of BRAC Bank, notes that the country experiences some sort of stability in exchange rate, foreign-currency reserves and balance of payments that happened in the last few months.
He hopes the banking landscape will see change in the next 4-5 years.
"I do believe there is no need of too many banks existing in the economy as we don't have skilled manpower, technical knowledge and capacity to run such a large number of banks," he told the summit meet on the economy.
Managing director and CEO of City Bank Mashrur Arefin terms central bank's ongoing revitalisation of the struggling banks with the funds of the affluent counterparts a smart move amid higher inflationary regime.
He predicts the country will face economic slowdown in the 10-12 months because of the contractionary monetary regime. "If business becomes slower, the threat of NPL (non-performing loan) will be higher. Both are totally interconnected."
The banker was suggesting paying more focus on asset management or recovery companies to clean the balance sheet.
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