Getting down to business
Wednesday, 10 February 2010
Mahmudur Rahman
For the better part of last year, the arguments about the appropriate spread for banks in terms of lending and charging, some ridiculous charges at times and the banks' concern about profitability and such were all up in the air.
Suddenly, it all seems to have gone quiet on the banking part. Following the 'nudged" downward revised lending rates appearing to have somewhat appeased aggrieved businessmen and the poor depositor ending up with the short-ended stick, an uneasy calm seems to have descended. With government borrowing increasing along with pressing ahead of the Annual Development Programme (ADP), the liquidity glut, though still high, appears to have come down to manageable limits. Banks still complain that they are sitting on large idle funds as demands for funding hasn't peaked and that they have to carefully balance the risk that they would take on in lending. And the general view would suggest the drive for attracting funds seems to have slackened somewhat.
What isn't talked about is the fact that the banks have made hefty profits leaving their shareholders chuckling. One banker described the profit filtering through the tills as being due to "aggressive" and "innovative" measures. There are some who quietly admit that profits could have been higher, had they not been more conservative so as not to increase expectations.
But a section of the press recently reported a statement attributing to the Finance Minister and it could have consequences that could well change the way banks do business. The minister has reportedly suggested that a banking reform law is on the cards. Specifically he was of the opinion that a section of banks through their systems is, in one way or other, supporting international terrorism. It was a view shared by another important functionary who earlier said money laundering and spending money on terrorism are the main hindrances to the socio-economic growth of Bangladesh.
These are strong allegations coming as they do from policy-makers. Following the success of systemising remittances and closer checks on movement of large sums (Bangladesh Bank requires any transaction above taka seven hundred thousand at one-go to be reported) and the repeated warnings by banks to account holders about money-laundering, one would have thought there would be a slowdown. Apparently that hasn't happened. Until a little more detail is provided, it may be difficult to pin-point exactly what sector is being pointed at. However, terrorists arrested by the law-enforcing agencies in the recent past have admitted that they did transfer funds through local banks for their activities.
Essentially, banks that fund business funds should be getting reports of progress through their monitoring system and raising flags whenever unusual activity emerges. Without wanting to put the cart before the horse, the emphasis on SME loans could well be an area where there is some scope for raising questions over transparency. Money laundering and funding terrorism is more likely through small rather than large ventures. Then again one never knows. (The writer is a former head of corporate and regulatory affairs of British American Tobacco Bangladesh and a former Chief Executive Officer of Bangladesh Cricket Board. He specialises in communications, corporate brand and corporate social responsibility. He can be reached at e-mail: mahmudrahman@gmail.com)
For the better part of last year, the arguments about the appropriate spread for banks in terms of lending and charging, some ridiculous charges at times and the banks' concern about profitability and such were all up in the air.
Suddenly, it all seems to have gone quiet on the banking part. Following the 'nudged" downward revised lending rates appearing to have somewhat appeased aggrieved businessmen and the poor depositor ending up with the short-ended stick, an uneasy calm seems to have descended. With government borrowing increasing along with pressing ahead of the Annual Development Programme (ADP), the liquidity glut, though still high, appears to have come down to manageable limits. Banks still complain that they are sitting on large idle funds as demands for funding hasn't peaked and that they have to carefully balance the risk that they would take on in lending. And the general view would suggest the drive for attracting funds seems to have slackened somewhat.
What isn't talked about is the fact that the banks have made hefty profits leaving their shareholders chuckling. One banker described the profit filtering through the tills as being due to "aggressive" and "innovative" measures. There are some who quietly admit that profits could have been higher, had they not been more conservative so as not to increase expectations.
But a section of the press recently reported a statement attributing to the Finance Minister and it could have consequences that could well change the way banks do business. The minister has reportedly suggested that a banking reform law is on the cards. Specifically he was of the opinion that a section of banks through their systems is, in one way or other, supporting international terrorism. It was a view shared by another important functionary who earlier said money laundering and spending money on terrorism are the main hindrances to the socio-economic growth of Bangladesh.
These are strong allegations coming as they do from policy-makers. Following the success of systemising remittances and closer checks on movement of large sums (Bangladesh Bank requires any transaction above taka seven hundred thousand at one-go to be reported) and the repeated warnings by banks to account holders about money-laundering, one would have thought there would be a slowdown. Apparently that hasn't happened. Until a little more detail is provided, it may be difficult to pin-point exactly what sector is being pointed at. However, terrorists arrested by the law-enforcing agencies in the recent past have admitted that they did transfer funds through local banks for their activities.
Essentially, banks that fund business funds should be getting reports of progress through their monitoring system and raising flags whenever unusual activity emerges. Without wanting to put the cart before the horse, the emphasis on SME loans could well be an area where there is some scope for raising questions over transparency. Money laundering and funding terrorism is more likely through small rather than large ventures. Then again one never knows. (The writer is a former head of corporate and regulatory affairs of British American Tobacco Bangladesh and a former Chief Executive Officer of Bangladesh Cricket Board. He specialises in communications, corporate brand and corporate social responsibility. He can be reached at e-mail: mahmudrahman@gmail.com)