Amid serious concerns over money laundering and terrorism financing, Bangladesh Institute of Bank Management (BIBM) has found that only 40% of authorized dealer (AD) banks in Bangladesh are capable of sharing credit reports of clients amongst themselves.
The research by BIBM titled “Practices of obtaining credit report of foreign counterparts in trade services - Is it working?” was conducted by a six-member team led by BIBM Director (training) Dr Shah Md Ahsan Habib was revealed on Monday.
Speaking at the presentation, Dr Ahsan said: “Most banks do not have arrangements for sharing the same credit report with the clients of different ADs, even of the same bank. In spite of the issuance of circulars on sharing credit reports amongst the clients, only 40% banks claimed to have an arrangement of maintaining a database and sharing.”
Presenting the findings at a round-table discussion, Dr Ahsan said that the AD banks have identified several reasons for the failure in sharing credit reports: restrictions from commercial credit reporting companies, collection of credit reports using their own costs, maintaining secrecy of counter parties and absence of adequate incentive.
Addressing the program as the chief guest, Bangladesh Bank Deputy Governor Abu Hena Mohd Razee Hassan said: “According to the central bank guideline on foreign exchange transactions, it is mandatory for banks to obtain credit report on foreign sellers by the ADs from their branch aboard or international credit report providing agencies before opening LC (letter of credit) or offering trade services to the importers. In the similar fashion, banks are also required to obtain information on foreign buyers before signing export,” he said.
“Some recent incidences drew our attention on the necessity of more efficient and effective enforcement of these requirements that are associated with commercial risks and the country risk as well,” he added.
BIBM Supernumerary Professor Helal Ahmed Choudhury said: “Credit reports will work as a risk mitigation process between buyers and suppliers. It will also ensure safe transactions. It will be helpful and cost effective if local banks share the credit reports obtained from international companies in exchange for high cost.”
BIBM Director General Dr Toufic Ahmad Choudhury on the chair, joint director of Bangladesh Bank’s Foreign Exchange Policy Department Pardip Paul, Islami Bank Bangladesh Ltd senior vice-president, Md Mahmudur Rahman, and Mutual Trust Bank Ltd vice-president ATM Nesarul Hoque, spoke among others at the event.
