TIB wants bank merger in line with global practices

The Transparency International Bangladesh (TIB) on Tuesday urged the central bank of Bangladesh to halt any merger of weak banks with stronger banks.
TIB emphasised the need for including essential reforms in the bank merger policy.
It also said changes in the industry must be in line with global norms and experiences as well as opinions of unbiased and renowned experts in the field.
The TIB said these in a press statement issued on the day.
The central bank has initiated steps to merge underperforming banks with stronger counterparts in order to save weak banks in the sector, which is not being in line with global best practices related to tackling crisis in the financial sector.
Global standards and policies including the Bangladesh Bank's own policies have been ignored to complete this sensitive and complex task hastily, it said.
"The arbitrary announcement of certain bank mergers, coupled with concerns among well-performing banks involved in the process and unwillingness of some underperforming banks, has worsened anxiety, unrest, and uncertainty within the banking sector".
Transparency International Bangladesh (TIB) believes that such instances have cast doubts over the entire process even before it started.
The anti-corruption organization asserts that the lack of transparency in the bank merger process, particularly concerning the management of default loans and issues of accountability within weak banks burdened by default loans, essentially sidesteps the main problem of the crisis and gives impunity to the factions responsible for loan defaults and forgery.
According to the merger policy issued by the Bangladesh Bank, underperforming banks are allowed to express their interest to merge with financially sound banks following the assessment of assets and liabilities by an auditor firm enlisted by the central bank and disclosing the details in the current year.
It said considering the evaluation of assets, there are provisions for good banks to voluntarily express interest in initiating mergers with weaker banks.
"Central bank can only resort to forceful mergers if the initial steps fail, TIB Executive Director (ED) Dr. Iftekharuzzaman stated adding: "Based on media reports, only one weak bank has shown interest in voluntary merger, and conversely, it's not necessarily the case that the financially sound banks mentioned in the process have willingly and consciously engaged in it.
This suggests that the entire process has been imposed on them arbitrarily, which is a clear violation of the declared policies.
"How fair and reasonable is it to transfer the burdens of default loans and forgeries to good banks without first assessing the assets and liabilities of the weaker ones?"
It appears that the ongoing actions are akin to prescribing paracetamol for cancer treatments.
On one hand, the culture of loan defaults is exacerbated by shielding factions responsible for them and forgery under the guise of mergers.
Contrarily, significant attempts are underway to compel good banks to digest weaker ones as a result of their success. This has fostered an atmosphere of anxiety and restlessness across the entire sector.
Expressing apprehensions that attempts to salvage weak banks might backfire, the TIB ED remarked, "Government-government, private-government, and private-private mergers are all being considered.
However, it remains unclear on what basis these banks have been prioritised, or how the decision was made regarding which financially sound banks would merge with which weak ones.
Additionally, some banks not yet mentioned in the merger process have been kept afloat through liquidity assistance.
However, two government-owned banks, known for their strong performance, are slated to absorb two underperforming banks despite having significant amounts of default loans themselves.
Given these circumstances, it is unrealistic to believe that simply merging banks, without ensuring effective accountability-based good governance to address the basic challenges in the banking sector, will resolve the problem or safeguard the interests of clients.

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