BB compliance department soon to enforce regulations

Past regulatory failures blamed for banks' woes

JUBAIR HASAN | Published: December 17, 2024 00:53:22

Bangladesh Bank (BB) plans to revamp the ongoing reforms by creating compliance department to ensure proper enforcement of the regulations in banks and other financial institutions, officials said.
The central bank's move comes after massive-scale loan-related irregularities in banks dug out following the recent changeover in state power through the mass uprising.
As the existing institutional framework failed to prevent the severe extent of financial malpractices by a group of corporate bodies during the previous Sheikh Hasina regime, the central bank authorities now seriously consider setting up a new department to take care of compliance.
Seeking anonymity, a BB official said they had planned to build a compliance department in the central bank and the department would be tasked to check whether the banks and financial institutions follow the regulations properly.
Highlighting the importance of such specialised unit, the official said the recent debacle in the banking industry was caused mainly because of regulatory failure.
"If the central bank as the regulator had taken proper regulatory steps in time, we would not have seen such disaster in some banks. And the department will look into the matter," the central banker said.
Bangladesh Bank Governor Dr Ahsan H Mansur very recently at a programme at BIBM gave a hint at forming such department, saying that the supervision activities will not work if there is no compliance.
Talking about the persisting crisis in the banking industry, the governor had said a chain of failures caused such catastrophic situation with blame going to regulator, banks and shareholders.
"We all are responsible for it. We need to correct ourselves," the governor had said with stress on the importance of compliance department to prevent recurrence of such mistakes.
The banking sector passes through a tough time because of spillover effects of large-scale loan-related irregularities in some banks. As a matter of fact, panic cash withdrawal takes place, leading to severe liquidity crunch to several banks.
To protect the struggling banks, the banking regulator was forced to inject high-powered money. The BB has already feed cash supports equivalent to Tk 225 billion to some of the liquidity crisis-ridden commercial banks.
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