The posts begin to move

Mahmudur Rahman | Monday, 11 February 2019

In the wake of the news that some $5.0 billion dollars were whisked out of the country's currency market in 2015, the new Finance Minister's decision to appoint audit and accounting firms to probe the bank scams is a signal that is music to the ears. The question could well be what had prevented this from happening before but at least matters are beginning to move. Nonetheless it was mystifying. Year after year loans turning bad, credit heaped on virtually non-entity organisations and hardly any action whatsoever to recover the loans or hold those responsible just didn't make sense. There was the usual excuse of inability to resist political considerations, the high-browed attitude of bank Directors and simple lack of due diligence. Management were regarded largely helpless but even with overseeing from the central bank the malaise refuses to go away.
At the last count bad debt has now crossed Tk 1.0 trillion (one lakh crore), numbers that the Bankers' Association would like to claim are not significant in view of loans that are good. All loans are good till they turn bad and there's not enough evidence to reassure that a large part of the rest of the loans won't turn bad. Shortly before the elections there was a flurry of deposits made against loans, few of them as per schedule but enough to get the certification tag of defaulter removed.
Mr. A H M Kamal has initiated two important steps. One is the filing of the case in New York to recover the foreign reserve heist and the second is announcing the appointment of accounting and auditing firms. That raises further questions about the credit risk controls in the banks. Their own auditors and risk units should have identified the bad loans much before they came to the media. The boards are expected to routinely assess such risk reports and authorise management to act accordingly. If the Boards have failed, action is expected against them by the central bank. Unfortunately, Bangladesh Bank's response has been a whimper rather than assertive action. In a multinational organisation, as was the case with GrameenPhone, the entire top team was phased out over the illegal VOIP in addition to hefty fines imposed by the Bangladesh Telecommunication Regulatory Commission (BTRC). Carlos Ghosn, the seemingly unflappable chairman of Renault and Nissan, is languishing in a Japanese jail for misdemeanours that he argues till today were not doings of his own. And once the court has satisfied itself with a judgement, more heads are likely to roll.
Till today in Bangladesh, save for the midnight takeover of Islami Bank, boards of banks have remained out of the gambit of any punitive action. No bank has been fined for obvious overlooking of that which their risk departments must have raised. And should that not have happened, wholesale management punishment has been too few and far between. Banking staff, especially top brass are reasonably well compensated in the private sector. The public sector banks have also done well to raise remuneration and perks. Responsibility comes with such privileges and if Boards have failed their duties, it is incumbent on the central bank to raise the flag. Merely advising banks to gear up loan recovery with paltry sums being coughed up cannot be the norm with public money. Nor is it reasonable for the government to have to make good capital flight. Or could it be that everyone's waiting for the Anti-Corruption Commission to get involved where they really shouldn't have to again.