Personal greed, self-interest and faulty oversight functions would be the main drivers of the country's unethical banking practices, which are often promoted by auditors' unqualified opinions.
Professor Dr. AKM Saiful Majid, chairman of the board of directors of the Grameen Bank and former director of the Institute of Business Administration (IBA) of the University of Dhaka, revealed the insights, delivering a memorial lecture on former central banker Nurul Matin, who died in late 1970s.
He noted: "Profitability and bank performance are ahead of ethical behaviour, and excessive, unrealistic pressure to achieve short-term targets are also reasons behind the poor status of ethical banking practices in the country."
He made a presentation styled "Ethics in Banking in Bangladesh: An Exploratory Discourse" at the twenty-first Nurul Matin Memorial Lecture on Ethics in Banking-2023, organised by the Bangladesh Institute of Bank Management (BIBM) on Saturday.
Bangladesh Bank Governor Md. Abdur Rouf Talukder joined the programme as chief guest, with BIBM director general Dr. Md. Akhtaruzzaman in the chair.
Dr. Majid pointed out that strong ethical leadership is important for creating ethical banks and said the managers needed to fairly treat their subordinates and make them clearly understand the management's expectations of them.
He said the managers should not use their subordinates/followers to achieve their personal gains, rather they should promote their legitimate goals and interests.
He said the banks in Bangladesh need to engage in corporate social responsibility (CSR) activities to focus on their responsibility to society and the community as well as to their employees. "CSR needs to aim at increasing the quality of life of the internal and external stakeholders".
He pointed out that non-performing loans, economic growth, and profitability of banks are very much related in Bangladesh.
Quoting a study, Dr. Majid said that there is a negative relationship between NPL-GDP and NPL-ROA (return on asset). "That is, NPLs have been adversely affecting the economic growth as well as the profitability of banks in the country".
He stressed the need for fair recruitment in banks which plays a critical role and said, "Some banks do not follow the practice."
He also pointed out that unqualified opinions given by the auditors played a significant role in promoting a number of unethical banking practices in Bangladesh.
"Ethical banking practices best serve the long-term interests of the stakeholders, particularly the customers, the service provider banks, and the bank owners."
He said: "To my mind, ethical banking practices have some inherent strengths and advantages, and can contribute to increased customer satisfaction, customer loyalty and customer value creation; creating opportunities for enhancing revenue and profit of banks; reducing risk exposure and better risk management; increasing reputation and image of the banks; creating competitive advantage(s) and enhancing the competitiveness of banks; protecting depositors' and shareholders' interests; boosting public trust and confidence; promoting sustainability of the banks."
jasimharoon@yahoo.com
