I have borrowed the caption from a book written by Ravi Subramanian. Though the book carries an insider’s fictionalised account of how Indian professionals experience the world of foreign banks, in my humble write-up, I will be focusing more on Bangladesh banking.
I have heard many senior bankers or even economists talk about the role of banks in a country’s economic development and economic value creation through wealth management. Look around yourself, look at the light bulb above -- someone must have imported this or manufactured this, which required bank financing or trade facilitation.
Look at a school or college -- it may be self-funded or put up under an annual development program, but the money flowed through a bank, to say nothing of large industries, infra-structure projects, inward remittances, payment services, consumer loans, credit cards, ATM, mobile commerce, etc.
The role of banks in market capitalisation in the local stock exchanges is tremendous; bank shares occupy almost 50% of market capitalisation and turnovers. Banks are getting increasingly engaged in SME financing, agricultural lending, project finance, cash management and thereby getting more identified in the country’s developmental process.
Yet, banks and bank officials are regularly being put in the dock by intelligentsia, the political regime, and even by bank regulators. Anybody and everybody is talking about reduction of bank’s interest rate, banks failing to support growth, making too much money, etc.
I heard a person talking about how the high interest is hampering the poverty reduction in Bangladesh. On the other hand, banks and their senior officials are receiving regular letters from various cultural organisations, charities, and educational institutions to support their activities through grants, even to support building a golf course, under their corporate social responsibility.
We often hear regulators or the ruling regime being unhappy about commercial banks making too much profit (I don’t even know the definition of “too much profit” though I know earnings or profitability is a significant contributor to share price and bank’s rating).
Political leaders occupying the bank board always think central bank guidelines are not applicable for them. Central bank seniors are treating a request from their close allies with utmost importance
If banks have excess liquidity (again a significant contributor to a bank’s credit rating), the business leaders want to gobble that at throwaway prices. If the banks are borrowing from the inter-bank market, they are being penalised or reprimanded by regulators and watch dogs. I even heard some civil society members wanting to influence a central bank governor on what should be the size of an MD’s room or what car they should ride.
When I shared a Vietnam story of bank executives being handed capital punishment, many people on social media thought it should be the same in Bangladesh. We have heard our regulators talking about how the recent board seat hijacking is nothing less than a hostile take-over.
Nobody is talking about how bank boards are being reconstituted with agency people with no role being played by the regulatory bodies. Scratching each other’s backs by the bank directors has become a regular phenomenon.
Political leaders occupying the bank board always think central bank guidelines are not applicable for them. Central bank seniors are treating a request from a defaulting ruling party senior or their close allies with utmost importance.
The houses and apartments of in-laws are being rented out to banks at high per square feet rates by the directors. A quota is being followed in most of the banks for appointment of junior officials at board members’ recommendation.
The acronym “MD” is nowadays being interpreted as “Managing the Directors.” Often, actions can’t be taken against a senior bank executive if she or he is related to “those who matter.”
In light of the above, I have been thinking -- if God was a banker, what would he have done, to face the challenges of contributing more to the national exchequer without increasing the earnings or diversifying the portfolio, diverting funds to the hungry streams of the economy, building up world-class resources without fears and favours?.
What would God have done, while the banks are forced to sponsor cricket, musical soirees, or building up golf course or even the conference of a pseudo-political organisation in the name “corporate social responsibility”?
Our banks have gone through many reforms -- Financial Sector Reform Project (FSRP), Loan Reforms Commission, Central Bank Strengthening Project(CBSP), Commercial Bank Reform, etc. We have seen the constitution of Artha Rin Adalat and the recent cognisance taken by the Anti-Corruption Commission.
We have noticed how the Ministry of Finance has put up an enquiry commission to investigate the misdeeds and governance failures committed by the former central bank governor and his associates. Sorry to say, nothing much happened.
Hence, people are saying that, before reforms, we need to see demonstration of minimum possible commitment from our political seniors. Not even zero tolerance. Just maybe a tad less tolerance and more responsible steps.
Deeds, not words.
Mamun Rashid is a leading banker and economic analyst.