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Study finds 46% of banks do not calculate disaster risk when lending

  • Published at 11:33 pm October 5th, 2017
  • Last updated at 01:43 am October 6th, 2017
Study finds 46% of banks do not calculate disaster risk when lending
Almost half of the banks in Bangladesh do not assess disaster risk when discharging loans, a study by the Bangladesh Institute of Bank Management (BIBM) has found. The research paper presented at BIBM auditorium in Dhaka on Thursday said 46% of banks were negligent on the issue, and claimed bankers and other stakeholders are unaware of the potential risks, consequences and losses from a disaster. The "Addressing Disaster Risk by Banks: Bangladesh Perspective" report said that banks in Bangladesh would face seven types of risks during any big disaster, affecting credit, security, liquidity, interest rate, inefficiency, reputation, and macroeconomics. In order to deal with these seven risks better, the study suggested preparing and implementing effective business continuity plans and disaster recovery management plans. It also advocated building awareness and training, developing products addressing disaster risk, creating an early alert system in the lending mechanism, and restricting lending to disaster compliant clients. Addressing the seminar as the chief guest, Bangladesh Bank (BB) Deputy Governor Abu Hena Mohd Razee Hassan said the banks’ core functions (deposit and lending) are directly exposed to disaster risks. “Banks are supposed to provide loans in different locations including disaster prone areas and for different sectors including agriculture, which is a risk prone sector,” he said. The deputy governor said the country’s banks are working to comply with the new Basel-III international capital accord by 2019. Basel-III is a comprehensive set of reform measures, developed by the Basel Committee on Banking Supervision, to strengthen the regulation, supervision and risk management of the banking sector. “Basel-III has not only micro-prudential elements, but also has macroprudential focus, to produce a banking system that is far more resilient. It is important for Bangladeshi banks to implement this global framework to withstand shocks from external systems,” he said. At the seminar, another research paper titled ‘Impact of Adopting Basel Accord in the Banking Sector in Bangladesh’ was presented by BIBM Professor Md Nehal Ahmed. Other speakers included Supernumerary Professors of BIBM, Helal Ahmed Chowdhury and Yasin Ali; Managing Director (MD) of Bangladesh Development Bank Limited (BDBL), Manjur Ahmed; MD of Meghna Bank, Mohammed Nurul Amin; and Dhaka University Finance Department Professor Dr Mahmood Osman Imam. The programme was chaired by BIBM Director General Dr Toufic Ahmad Choudhury.
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