Assessing financial health of banks has lately become difficult as the central bank has stopped publication of some relevant data, including their interest- rate and spread variables, for four months now, sources said.
Bangladesh Bank (BB) has ceased releasing such key information about the state of commercial banks' regular operations, particularly weighted average lending and deposit rates and spread. It becomes difficult for money market observers and bankers to understand actual situation in the sector in the context of highly contractionary regime.
Economists are critical of such a move on part of the central bank as they think disruption to the flow of vital banking statistics would hamper transparency and trust in the money market.
Seeking anonymity, a BB official has said the central bank, following top management instructions, has skipped publishing weighted average rates of lending and deposit and spread in banks since October 2023.
The central banker informed that a BB department concerned very recently put up a file regarding resumption of data publication but the management sent back the file sans approval.
"I don't know the exact reason behind discontinuation of the statements. But, we're not publishing such information at the moment," said the BB official.
The BB official also said the central bank earlier had issued an instruction through which the banks can show spread of the performing assets. But, after August 2023, another circular has been issued with change in the reporting format and directives for the banks to show interest rates on non-performing assets as well.
Shortly after the revision in the format, the official said, such information is not being published.
When contacted, BB spokesperson Md Mezbaul Haque said the banking industry was now in a variable-rate regime after the introduction of SMART rate.
"As a matter of fact, the interest rates keep changing too frequently in banks and collecting too many data from banks before placing those in a proper programming would require time."
Citing reasons for not publishing the statistics, another BB official said the reporting format of the data would need to be changed to make those properly market-reflective.
There is a significant volume of deposits, particularly the savings, where depositors receive almost no returns, and if the weighted average rate is made based on existing format, it will not truly reflect the market.
"That's why we (BB) are planning to change the format. I hope you will soon see the revised format, which will be more informative," the official informed.
According to the BB sources, savings accounted for at least 12 per cent of the total deposits in the banking sector where depositors receive very lower rates. Taking the existing format into account, the weighted average deposit rate is around 5.0 per cent while the weighted average lending rate is around 10 per cent and the spread stands almost 5.0 per cent.
A top executive of a private commercial bank, who preferred not to be quoted by name, says the net interest margin (NIM) keeps rising in the banking sector with the growing rates of interest in recent times.
Simultaneously, the yields on government treasuries are in an upward trend, prompting the commercial banks to invest more in the risk-free instruments.
"If the data are released publicly, a certain group might start creating pressure on the regulator to lessen the lending rate as banks' earnings continue increasing," he adds.
"It could be a cause, but I am not sure," says the banker.
But discontinuation of releasing the basic data also creates a problem as the banks are in the dark about the rates in the peer group. "If I don't have the data, how do I evaluate effectiveness of my bank's policy? The banker posed the question.
Former lead economist of World Bank's Dhaka office Dr Zahid Hussain thinks suspension of releasing such key information would create transparency-related problem in the sector.
"I don't know whether it is bureaucratic decision or political economy is involved behind this. But it is not a right approach," he says.
Chairman of the Policy Exchange of Bangladesh Dr M Masrur Reaz also thinks discontinuation of such vital statistics in the sector would hamper transparency and market confidence.
"Availability of such key data is a must. If there is any doubt or confusion regarding robustness of the statistics, the BB will have to look into the methodology. But stopping data is not a solution," he opines.
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