Six banks asked to show cause over dollar bets

The central bank now serves show-cause notices to top executives of six banks for their alleged involvement in fuelling volatility on the forex market through 'unethical' exchange gains, locking their profits.
Officials say that, with the proceedings pending, the scheduled banks have been forbidden from transferring 'excessive' profits from exchange gains during the January-May period of this calendar year into their income accounts.
In the group of six suspects are Dutch-Bangla Bank, Southeast Bank, Prime Bank, City Bank, BRAC Bank and Standard Chartered Bank, according to the proceedings underway.
The Bangladesh Bank (BB) sent two letters separately to the banks on Wednesday evening, they add.
"We've instructed the managing directors (MDs) and chief executive officers (CEOs) of the banks to submit their clarification to the central bank within seven working days," BB spokesperson Md Serajul Islam told the FE Thursday.
He says the MDs have also been asked to inform who are responsible for the volatility on the country's foreign-exchange market.

"We'll take the next course of action after receiving the explanations from the MDs," the spokesperson notes.
Sources, however, said the MDs and CEOs were asked to explain some issues including alleged higher spread between selling and buying rates of the greenback along with incorrect reporting on their net open positions during the period under review.
Talking to the FE another BB official says banks will have to revert if any banks booked such profit into their general incomes.
The latest BB directives came after more than a week of taking action against treasury heads of the six banks for their alleged involvement in gaining excessive profit through unethical practices in foreign-currency exchange.
Earlier on August 08, the central bank asked MDs and CEOs of the same banks to relegate their treasury heads to human resources (HR) department immediately on allegation of fuelling up the foreign-exchange mark recently through quoting 'unusual' higher prices of the greenback.
Earlier, the central bank had completed on-site inspections into 16 banks, including
four state-owned commercial banks (SoCBs), to find out alleged 'distortion' in foreign-exchange rates by the banks concerned besides other forex issues.
Rate distortion means banks charge higher price of the US currency bypassing their announced rates, particularly for BC (bills for collection) selling and TT (Telegraphic Transfer) clean.
Actually, the banks were blamed for buying the greenback at a lower rate from exporters as well as other sources, including exchange houses abroad, while selling the American currency at higher rates to the importers by bending the forex rules and regulations.
"The banks were able to make 'hefty growth' from the exchange gain during the period under review through alleged unethical practices," another central banker explains.
He also says the central bank is taking such action against the banks in line with the existing Bank Company Act.
During the inspections, the BB teams had found that the banks did not show their foreign exchange deposited with overseas accounts, officially known as NOSTRO account, in their net open position (NOP) properly.
A NOSTRO account is an account that a local bank maintains with an overseas bank in the foreign currency.
On the other hand, NOP means the net sum of all foreign-currency assets and liabilities of a financial institution, inclusive of all of its spot and forward transactions and off-balance-sheet items in that foreign currency.
Talking to the FE, Toufic Ahmed Choudhury, former director-general of the Bangladesh Institute of Bank Management (BIBM), said: "The BB action is very bold. And the market will get a clear message that any irregularities will be untimely punished."
Currently, the local currency is maintaining a depreciating mode against the dollar mainly due to higher outflow of foreign exchange following 'hefty growth' in import payments compared to the inflow in the last few months.
The local currency has lost its value by Tk 9.20 or 10.72 per cent since January 2022. The dollar traded at Tk 85.80 on January 08 last.
The US currency was quoted at Tk 95.00 each on the interbank forex market on Wednesday -- unchanged from the previous level. Cash dollar, however, traded as high as Tk 109 on the kerb market.
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