MoF finally decides to restructure ailing BCB

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Nazmul Ahsan
The Ministry of Finance (MoF) has finally decided to wash its hands of the ailing Bangladesh Commerce Bank (BCB), thanks to the recommendation of Bangladesh Bank (BB) and interest shown by a number of investors to buy the government stake in the bank, officials said.
The decision of Finance Minister AMA Muhith came last week about one year after the Bangladesh Bank had recommended four options in restructuring the troubled bank.
"The minister (Muhith) has given approval to restructuring the BCB, which wants the cabinet meeting take a decision on one of the four options recommended by BB," a top MoF official told the FE on Thursday.
"The proposal on BCB will soon be placed to the Cabinet Division for approval," he added.
Earlier, the BB in August last year recommended an increase in paid-up capital of the bank and transfer to a strategic partner.
The central bank in its second option recommended formulation of a reconstitution scheme for the BCB and transfer its share to both new investors and to existing depositors of the bank.
The merger of the BCB with any other bank, particularly with one of state-owned banks, was the third option suggested by the BB.
The BB in its last option recommended selling off the government's share to private sector without increasing the BCB's paid-up capital.
The BB in February, this year submitted yet another suggestion to the MoF, elaborating and fine-tuning the earlier one.
The BB suggested the government to increase the paid-up capital of BCB through issuing rights shares or restructure it soon to make the largely government owned bank a viable financial entity.
The BB in its recommendation proposed issuance of 1.25 rights shares for every single share of Tk 100 to increase the paid-up capital of BCB from existing Tk 920 million to Tk 2.0 billion.
Currently, the BCB has Tk 2.0 billion in authorized capital and Tk 920 million as paid-up capital.
The BCB has a capital shortfall of Tk 1.63 billion and provision shortfall Tk 766 million as of June, 2009. The non- performing loan as of March last was 27.67 percent of the outstanding loan of the bank.
Meanwhile, a group of at least eight, including one joint-venture food company, business entities conveyed its intention to the Prime Minister's Office (PMO) to take over the 40 per cent government stake in the BCB.
Besides, a businessman-turned lawmaker has long been perusing a number of top policy maskers in the government to buy the entire government share of BCB, informed sources said.
Muhith in his approval said let the cabinet meeting decide whether the BCB should be divested or be merged with another state-owned bank, sources said.
"Our Minister is not in favour of increasing the paid-up capital of the ailing bank," a top finance ministry official said.
He said a Task Force might be formed to finalise the modalities of divesting the bank once after the cabinet meeting takes the positive decision.
The BCB was established through the reorganisation of the former Bangladesh Commerce and Investment Ltd. (BCIL), which was set up on 27th January 1986 as a non-banking financial initiation.
BCIL started functioning as an investment company and continued its business until April 1992. Consequent upon its liquidity crisis, BB suspended its operation in April 1992. As a result the investors suffered a lot and the employees of the company rendered jobless. Ultimately, to safeguard the interest of the depositors, employees and the general public, the government intervened and Parliament passed an act in 1997 for the establishment of Bangladesh Commerce Bank Ltd.
The bank formally started operation form September 16, 1999 with the paid-up capital of Tk. 920 million. Of the amount, Tk. 300 million was provided by the government, Tk 100 million jointly by Sonali Bank, Janata Bank and Agrani Bank and the rest Tk.520 million by the depositors.
Presently, three directors represent depositors on 12-member boards of directors of the bank.
The BCB has 25 branches employing 452 officers and employees.