Headlines of a number of news reports concerning banking sector developments, published during the last couple of days, appeared very much linked, of course, accidentally.
Most national dailies last Monday carried reports on the Financial Stability Report (FSR) that had been released by the central bank (Bangladesh Bank) at a function attended by the key functionaries of the central bank, banks and other financial institutions, including the BB governor, on the previous day.
The headlines of the reports highlighted one single fact: erosion of banks' profitability by bad loans, in the year 2014.
On the same day, one Bengali contemporary in its front-page lead story said financial crimes had been on the rise in banking institutions for lack of 'exemplary' punishment to persons responsible for such incidents.
It has been alleged in the said report that a section of top and mid-level bank officials are involved in corrupt and fraudulent activities with a view to getting rich overnight. And the lack of appropriate punitive actions against such criminal activities has been encouraging others to indulge in the same evil practices, the report mentioned.
As if to support the content of the report, the next day (Monday) two other Bengali dailies front-paged news items on the conclusion of the Anti-corruption Commission (ACC) probe into the BASIC Bank loan scam, the largest ever in the country's history.
The reports, quoting unnamed sources in the banking sector, raised questions about giving the BASIC Bank's immediate past chairman a clean chit by the ACC investigators.
The investigators have found the immediate past managing director and some other officials responsible for the loan scams.
It is, however, widely believed that the former chairman had masterminded the swindling of a substantial amount of bank's money through collateral-free loans at the Gulshan, Santinagar, Dilkhusha and local office branches of the bank.
The ACC officials have claimed that they have found no documentary evidence to implicate the former BASIC Bank chairman. But the bank insiders have immediately dismissed the claim.
The ACC findings, in all likelihood, would spring surprises even among many in the government, including the finance minister. A number of treasury bench members in the parliament criticised the government's failure to take action against the bank's immediate past chairman.
The finance minister also had expressed his frustration in parliament over the failure to take actions against the people involved in Sonali Bank (Hall-Mark) and the BASIC Bank loan scams because of the backing by the 'party men'.
No matter what the ACC investigators say, it is simply impossible for a few top officials to allow embezzlement of such a large amount of funds without the approval of the board of directors or chairman of any bank, be it a private or a public one.
In all probability, the financial crimes were committed collusively. Interestingly, the then managing director and some other officials were put on suspension soon after the media exposure of the loan scam. But the then chairman was allowed to continue for months together. This indulgence might have given him the scope and time to eliminate and alter documentary evidences against him.
Amid such developments, the very importance of a piece of advice that the central bank governor gave to the managing directors (MDs) and chief executive officers (CEOs) of banks and non-banking financial institutions, while unveiling the FSR last Sunday, to be cautious about sanctioning of fresh loans and recovery of the existing ones otherwise, gets diluted to a large extent.
The governor's concern over the rising trend in non-performing loans (NPLs) in the banking sector, from 8.9 per cent in 2013 to 9.7 per cent in 2014, is very much justified. The FSR of 2014 offers a mixed picture of the country's banking sector. The picture would have been a little bit ugly had the 'window-dressed' volume of NPLs been taken into account.
The BB governor's appeal to banks' MDs and CEOs to ensure stability in the country's banking sector by establishing good governance in their own financial institutions by any measure was a befitting one. But, unfortunately, the overall environment in the banking sector, because of both exogenous and endogenous factors, is not conducive enough to ensuring the expected level of stability.
If individuals involved in major financial scams can get away with their crimes because of their connections with people at 'high places', it would be too much to expect stability in the banking sector. The existence of higher volume of NPLs is the outcome of mal-governance in any banking system.
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