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'Culture of impunity must end'

  • Published at 10:12 pm June 3rd, 2017
'Culture of impunity must end'
Good governance will not be fully established in banking unless people like the former chairman of BASIC Bank Sheikh Abdul Hye Bacchu are punished for their corruption. The government provides recapitalisation to financially weak banks instead of taking exemplary legal action against those who make the banks vulnerable, he says. Recapitalisation of state owned banks should be done by the government because those banks are owned by the government. We have learned that in the next budget, Tk2000 cr has been set aside for the recapitalisation of state-owned banks. The culture of impunity must end in the banking sector if good governance is to be enforced. Are you sure the government can get back the central bank’s stolen money? Bangladesh Bank should have disclosed matters of the stolen foreign exchange reserve after recovery of the stolen money. Foreign hackers have taken opportunities as we have disclosed the matter to the media. Now Philippine authorities say Bangladesh Bank itself is responsible for that incident.
Good governance will not be fully established in banking unless people like the former chairman of BASIC Bank Sheikh Abdul Hye Bacchu are punished for their corruption
Filipino casinos now say it is not possible to return that money, though one Filipino minister said, a new law will be enacted to get the money back. Since both Bangladesh and Philippine are members of Egmont group, now this is the responsibility of Philippine to return the stolen money, as the provisions of the group held the country responsible where the money is laundered. The Federal Bank of India recovered $112 million stolen money from its reserves and then disclosed the matter to the media. The stolen funds from BB will return in time but it may take time. How can we ensure good governance in the banking sector? Bangladesh Bank has deployed observers in 27 out of the 54 banks. That means half of the banks are now problem banks. There is no effective internal control within most of the banks. The central bank cannot set up vigilance teams in all 9,500 commercial bank branches. The reason why the banking sector is in a bad shape is because of a lack of good governance. Many say banking sector’s main problem is Non Performing Loans or default loans but the real issue is good governance. We have to know the structure of banking sector governance. External governance is maintained by the central bank but internal governance will be maintained by the banks themselves through their effective internal control. If a bank does not maintain internal governance, the central bank can do nothing with outside monitoring. The central bank cannot improve the banking system without successful internal governance in the banks. Without improvement of good governance, the banking culture will never make any progress. Big loan scams like Hallmark and Bismilllah happened due to lack of internal control. Is latest amendment of Bank Company Act good for banking sector? Ignoring the deplorable governance situation, the cabinet gave its consent to the amendment of bank company act allowing the appointment of four directors from a family instead of two for private banks. Four directors will create more problems of governance and the situation is likely to deteriorate than improve. We will be very happy if the government can increase the number of independent directors and put emphasis on transparency in their selection. Main owners of the bank are depositors and in percentage terms they own 95% of a bank. Board directors contribute only about 5% to the bank. The government has not taken any decision to protect the interests of the depositors. This decision favours the 5% contributors. Now the government is moving to make directors’ positions permanent, which will not bring anything good for the banking sector. It is not the right decision for the sector and the government should think about the matter. More surprisingly, government is planning to impose excise duty, on the depositors’ money, in addition to source tax on interest income, and high maintenance fee of PCBs. Already the depositors return is negative, because prevailing interest rate on deposit is lower than inflation rate. In such a situation, imposing excise duty on deposit is absolutely unacceptable.