BB plans to assess asset quality of weak banks before restructuring


SYFUL ISLAM | Published: October 04, 2024 23:44:30


BB plans to assess asset quality of weak banks before restructuring


Restructuring and recapitalisation of weakened banks are in a bailout package being mulled by the regulator as financial health of many public-and private-sector lenders deteriorated following wanton plunder in the recent past, officials said.
Before applying the remedy, the asset quality and business viability of the banks will be assessed with external assistance, they added.
They have said the central bank is now in discussion with the World Bank for technical assistance and financial support and also for possible recapitalisation of some banks.
The Bangladesh Bank has sought some $270 million from the World Bank under the Financial Sector Support Project II from where some $70 million will be spent on strengthening Bangladesh Bank's technical capability and capacity for effective regulation and supervision.
The other components of the project will focus on supporting the central bank in stabilising the banking sector by assessing the asset quality and business viability of banks, enhancing bank intervention and resolution framework, formulating a strategy to stabilise the banking sector, and augmenting financial resources for restructuring and recapitalisation.
The World Bank fielded a project -preparation mission early last month and discussed with central bank governor Dr Ahsan H Mansur the project components.
According to sources, the governor gave high importance on addressing the banking-sector vulnerabilities.
He also emphasised the importance of a proper asset-quality review and banking-sector restructuring and requested technical assistance and financial support for possible recapitalisation of some banks.
With direct patronage from the high-ups of the ousted Awami League government, said Dr Mansur in a recent event in Dhaka, four to five business groups looted at least Tk 2.0 trillion from the banking sector and so a good number of banks have become financially vulnerable.
Some eight to nine private-sector banks are thus failing to pay back money to the depositors, which created commotion among the bank customers.
Some state-owned banks are also experiencing liquidity crisis, officials said, adding that they may also need recapitalisation as they were "looted open-handed by some oligarchs".
Abdul Hai Sarker, chairman, Bangladesh Association of Banks (BAB), on Thursday told newsmen that many left Bangladesh by looting bank money and most of the borrowers were not paying loan back.
The private banks' owners on the day requested finance adviser Dr Salehuddin Ahmed to arrange loan package from the World Bank, the International Monetary Fund or other multilateral lenders to help rescue the nine distressed banks.
Contacted Friday, central bank spokesperson Husne Ara Shikha told the FE that under the banking-sector reform programmes recapitalisation of some banks may be needed.
"After assessment of the asset quality of the banks, if we see recapitalisation of the banks are needed, we will arrange necessary funds," she said.
Ms Shikha said a major portion of the funds to be provided by the World Bank under the project will be spent for capacity building of the central bank through strengthening IT infrastructure.
Thereafter, the asset quality of a couple of vulnerable banks will be studied and then the issue of recapitalisation will be considered, she added.

syful-islam@outlook.com

Share if you like