Directors of state-run banks are still failing in their duty to monitor and protect risks to their banks’ assets.
With bad debts continuing to grow in banks owned or run by the state, there is little sign that the Tk5,000 crore ($625 million) set aside to bail out state-owned banks in the coming year will stem continuing losses.
Reforms required by the central bank are not making sufficient headway. Bangladesh Bank reports indicate that directives to minimise fiscal risks have been ignored or inadequately implemented.
There is little surprise that a recent investigation has found that the state-run Bangladesh Commerce Bank Ltd (BCB) violated credit rules to lend huge amounts of money to an MP. Reportedly, officials of BCB’s Bangshal branch breached the single borrower exposure limit of 15% of the capital to loan almost 28% of the bank’s capital.
While eight officials have been suspended over the alleged irregularities, and further inquiries are underway, the case is a further indication that political interference, corruption and other irregularities are endemic in the state-run sector.
The problematic state-run banks should not be given new capital. The most effective solution is to transfer loss making state-run banks to private management.
Privately-run banks have consistently proved themselves to be better run as they are freer from political interference and being directly accountable to their shareholders, their management is better at stopping fraud, and reducing risks and loses.
The government should reduce losses to taxpayers by privatising state-run banks.
