Transparency International Bangladesh (TIB) has expressed concern over the central bank decision to allow Padma Bank to clean its balance sheet by erasing its accumulated losses in order to attain foreign direct investment (FDI).
The agency termed the facility as unethical and fraudulent, saying it would jeopardize Bangladesh Bank's credibility in establishing discipline and good governance in the financial sector in the future as well as risk tarnishing its image abroad.
The accumulated loss of the bank now stands at around Tk805 crore and it would be allowed to adjust the amount within the next 10 years, including a grace period of one year.
According to media reports, Bangladesh Bank has agreed to create a separate account for the troubled Padma Bank for the next 10 years, keeping the bank's financial loss information secret from the bank's financial statements, on condition that it would bring in $700 million in FDI, TIB said in a press release.
Dr Iftekharuzzaman, executive director of TIB, said that shortly after its inception, the bank management and owners resorted to massive financial irregularities and then changed the name to save the former Farmers Bank.
Later, the state-owned financial institution Investment Corporation of Bangladesh, Sonali Bank, Janata Bank, Agrani Bank and Rupali Bank bought 60% stake in the bank for Tk715 crore.
“But despite all of this, there is no sign of the bank turning around, but the scale of losses is getting heavier day by day. In such a scenario, the attempt to make the bank's financial statements clear by omitting the loss information is not only unethical, but also fraudulent from the point of view of accounting,” the TIB executive director said.
It is not clear why Bangladesh Bank, as the regulator of the financial sector, is taking responsibility for creating all the unprecedented examples in the name of saving the bank, he added.
“The bigger question is, what is the guarantee that the promised foreign investment will be possible only if the financial statements are artificially good?” Iftekharuzzaman questioned.
“It is unwise and suicidal to take such an unethical and deceptive path without considering the consequences, if the expected results are not forthcoming in the large-scale fundraising that is being talked about, which calls into question the logical decision-making process of the central bank as a regulatory body," he further said.