Govt seeks details on winding up of JB subsidiary in Italy

The government has asked Janata Bank (JB) to provide a tentative schedule for winding up the operations of its subsidiary, Janata Exchange Company (JEC), in Italy.
The state-owned bank has also been asked to explain whether the closure of the exchange operations would have any adverse impacts on remittance transfers from the European country.
The Financial Institutions Division (FID) recently issued a directive to the bank, seeking information on five key aspects related to JEC. These include details on the timeframe for closing the operations, information on any collateral, such as volume, deposited with the central bank of Italy, and a schedule for the refund process.
The FID also directed the bank to provide an expected procedure for preservation of all documents of the exchange house, specifying custodial arrangements and associated costs for this purpose. When contacted, Managing Director of Janata Bank Md. Abdul Jabber said: "We are working on it. There are many types of formalities for the closure. We've already written to the FID on the issue."
He said, "We will be able to start working on it after getting necessary approval from the division."
The central bank in July 2023 instructed the state-run bank to shut down its loss-making subsidiary to protect customer deposits and sustain foreign currency reserves.
The division was instructed to know the estimated volume of financial compensation for the outsourced employees hired by the JEC as per the Italian labour law.
There are two branches of JEC in Italy - one in Milan and another in Rome. The company started operation there in June 2002.
It was a profit-making company until 2008, but since then it started incurring losses.
The JEC, Italy is on the verge of bankruptcy due to its continuous operating losses despite various steps taken by the authorities concerned, a source said.
The state-owned Janata Bank counted more than Tk 455 million to cover the exchange house's losses from 2009 to 2020.
The subsidiary received over Tk 113 million as its equity from the Janata Bank which was not endorsed by the Bangladesh Bank (BB) for the period of 2021 and 2022.
Due to a liquidity shortfall, the exchange house has started facing bankruptcy proceedings in line with Italian laws. The state-run bank had taken a two-year action plan to make the entity profitable. But it failed to implement the plan.
Janata Bank runs its business with 922 branches across the country including 4 overseas branches in the United Arab Emirates.
Currently, the volume of authorised and paid up capital of Janata Bank are Tk 30 billion and 23.14 billion respectively.

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