NRB banks were granted licenses for non-resident Bangladeshis to be identified in the development process of the country. Though any special package drawn for the NRBs in the capital market or issuance of premium, investment bond by the Bangladesh Bank, or donations to the construction of the Padma Bridge didn’t yield desired results in the past, it was thought that Bangladeshi professionals or businessmen residing abroad would be able to “success transfer” through their engagement in Bangladesh financial markets. Thus, the government has issued licenses to three NRB banks.
We do have a state-owned “Prabashi Kalyan Bank.” Courtesy to Mohammad Farashuddin and his successors in the Bangladesh Bank, most of the commercial banks in Bangladesh are rightly or wrongly too focused on inward remittance facilitation. Thus, the people at Bangladesh Bank or the finance ministry’s banking division were finding it tough to satisfy them to issue new licenses to three commercial banks reportedly owned by NRBs.
But for reasons known, the licenses were issued at the instructions of the “top brass.” I was told by a senior Bangladesh Bank official, with all this “dhamaka” with the NRBs, certain quarters even wanted more licenses to be issued for the NRBs to find “an opportunity in nation building.” The finance minister, as usual, was very candid in the parliament – “licenses have been issued on political consideration.” Many of his loyalists, including this scribe, hailed him for his openness. Who got the licenses? Awami League leaders in the US, and quarters close to the ruling party in Bangladesh.
No worries. The political leaders intelligently had some professionals and local businessmen with non-resident connections engage these banks. They could fortunately attract a few senior, but almost retiring, bankers to join them too. One of those banks, with the least amount of political connections, could attract people from global banks too.
But the job was not done. NRB banks with unprofessional ownership and less visibility about the destination could not put a mark in the local finance industry, be it inward remittance, international trade, or infrastructure financing.
Though it is a little premature to close out on them, they have literally failed to ensure migration of best practices from their markets to the Bangladeshi banking industry. They are simply upholding the bad legacy of local banks – poor risk analytics, insider lending, poor IT delivery platforms, and poor human resources.
To their credit, they are facing stiff competition from their local peers. Their inability to open “nostro accounts” with large clearing banks in the US, UK, Japan, Australia, and Europe, and most importantly, obtain credit or trade confirmation lines from international banks, didn’t help them to get identified in the cross-border trade in an emerging trading nation: Bangladesh.
Ownership of the political leaders or ruling party stalwarts in these banks barred international banks from opening their accounts. US banks have always been known and respected for smelling of “foreign corrupt practice,” “politically exposed persons (PEP),” or “significant public figure (SPF).”
Unfortunately, most of the NRB bank directors fall into this category. The finance minister’s testimony made their journey much tougher though. Hefty penalties imposed on a British Bank by US regulators for holding the USD clearing accounts of a few Islamic banks in Bangladesh made it all the more complex.
European banks also reportedly followed the same route. Since most of the NRB bank principal licenses didn’t have enough money to pay for the licenses, other than their political identity and favours from the highest political authority, they had to bank on the local business houses to pay for their shares in the form of large “premium” payment for their individual stakes in those banks. These new owners are bent on getting their money back or their favours returned; thus resorting to massive insider lending.
I think that unless NRB banks can differentiate themselves from the crowd, put in a strong delivery platform, ensure better asset-liability management, obtain world class risk management tools, and most importantly, allow the professionals to play their due roles, they don’t have a good future. We were expecting better results from our NRBs. It’s likely that we may have to wait a bit if we wish to see them performing in Bangladesh and delivering on their desired success transfer.
