CAMEL ratings 'to put pressure on banks to improve performance'
Wednesday, 9 December 2009
FE Report
The central bank should publish CAMEL ratings regularly for creating extra moral pressure on banks to improve their performance, former adviser of caretaker government Akbar Ali Khan recommended Tuesday.
"CAMEL rating of banks by Bangladesh Bank (BB) should be published at regular intervals. This will put extra moral pressure on banks to improve their performance," Mr. Khan said while delivering ninth Nurul Matin Memorial Lecture on Ethics in Banking at Dhaka Sheraton Hotel.
The central bank will examine the recommendation in line with the existing Bank Companies Act, BB Governor Atiur Rahman told the FE without elaborating.
The former secretary also recommended that a law should be enacted disqualifying the members of political parties and their affiliates from directorships in banks and non-banking financial institutions (NBFIs).
"….directorship in public banks must not be allowed to degenerated into political patronage," Mr. Khan said, adding that political directors tend to undermine public confidence in banks.
"The dominance of bank boards by political directors may promote unholy nexus between money and politics. Finally such directors may exert undue pressure on bank regulations and supervisions," he noted.
The Bangladesh Institute of Bank Management (BIBM) organised the lecture on 'Ethics in Banking' in which the country's eminent economists, bankers and policy makers were attended.
AFM Nurul Matin, a renowned banker, was the deputy governor of the central bank of Bangladesh. He played an important role in preparing Bangladesh Bank Nationalisation Ordinance, 1972. He died on February 23, 1978.
"We've a growing banking sector. The growth is very well," Finance Minister Abul Maal Abdul Muhith said while speaking on the occasion as the chief guest, adding that it is becoming much more discipline.
The former advisor also recommended that each bank should lay a comprehensive code of conduct. An ethics office should be established in each bank to enforce the code of conduct, he added.
About default loan, he said the pervasive default culture in Bangladesh financial sector undermines healthy ethical practices.
"Ironically, the rich and the mighty in Bangladesh do not usually repay back loans whereas the poor and the weaker sections of society do. Unless appropriate punishment could be meted out to large willful defaulters, the temptation to have a free ride on banks is likely to escalate," he added.
Mr. Khan also recommended that the government should immediately enact an appropriate legislation to punish financial swindles and frauds and an effective agency should be established to enforce this law.
Regarding Islamic banking, he said the Islamic banks should renew their efforts for realising their avowed goals of social justice and risk sharing. "Islamic banks should be true to the spirit pf their great religion."
The central bank should publish CAMEL ratings regularly for creating extra moral pressure on banks to improve their performance, former adviser of caretaker government Akbar Ali Khan recommended Tuesday.
"CAMEL rating of banks by Bangladesh Bank (BB) should be published at regular intervals. This will put extra moral pressure on banks to improve their performance," Mr. Khan said while delivering ninth Nurul Matin Memorial Lecture on Ethics in Banking at Dhaka Sheraton Hotel.
The central bank will examine the recommendation in line with the existing Bank Companies Act, BB Governor Atiur Rahman told the FE without elaborating.
The former secretary also recommended that a law should be enacted disqualifying the members of political parties and their affiliates from directorships in banks and non-banking financial institutions (NBFIs).
"….directorship in public banks must not be allowed to degenerated into political patronage," Mr. Khan said, adding that political directors tend to undermine public confidence in banks.
"The dominance of bank boards by political directors may promote unholy nexus between money and politics. Finally such directors may exert undue pressure on bank regulations and supervisions," he noted.
The Bangladesh Institute of Bank Management (BIBM) organised the lecture on 'Ethics in Banking' in which the country's eminent economists, bankers and policy makers were attended.
AFM Nurul Matin, a renowned banker, was the deputy governor of the central bank of Bangladesh. He played an important role in preparing Bangladesh Bank Nationalisation Ordinance, 1972. He died on February 23, 1978.
"We've a growing banking sector. The growth is very well," Finance Minister Abul Maal Abdul Muhith said while speaking on the occasion as the chief guest, adding that it is becoming much more discipline.
The former advisor also recommended that each bank should lay a comprehensive code of conduct. An ethics office should be established in each bank to enforce the code of conduct, he added.
About default loan, he said the pervasive default culture in Bangladesh financial sector undermines healthy ethical practices.
"Ironically, the rich and the mighty in Bangladesh do not usually repay back loans whereas the poor and the weaker sections of society do. Unless appropriate punishment could be meted out to large willful defaulters, the temptation to have a free ride on banks is likely to escalate," he added.
Mr. Khan also recommended that the government should immediately enact an appropriate legislation to punish financial swindles and frauds and an effective agency should be established to enforce this law.
Regarding Islamic banking, he said the Islamic banks should renew their efforts for realising their avowed goals of social justice and risk sharing. "Islamic banks should be true to the spirit pf their great religion."