Crisis in banking sector: ‘Lack of corporate ethics main cause’
Published : 16 Dec 2017, 11:34:36
Bad loan is crippling the banking sector in the country. As of June this year, the amount of accumulated default loans stood at around Tk1,19,000 crore, which is 12 per cent of Bangladesh’s GDP.
Experts said the rising trend of bad debts might paralyse the banking sector and the economy of the country.
Bankers have identified lack of corporate ethics as the topmost reason behind the rising trend in financial crimes in the country's banking sector.
Financial irregularities in the banking sector are increasing due to lack of corporate ethics, according to a research report of the Bangladesh Institute of Bank Management (BIBM) released on Thursday. The report says around 73 percent bankers of the country think financial irregularities in the banking sector are increasing due to lack of morals.
The report says lack of punishment of those involved in irregularities was the second major cause of financial irregularities. Other factors include lack of awareness, lack of motivation for morality and low payroll of bankers. BIBM interviewed 200 bankers for this research report.
Bangladesh Bank deputy governor Abu Hena Mohammad Raji Hasan said banking business is completely dependent on confidence.
“It is difficult to run a banking business when a crisis of depositors' confidence starts. Recently, there has been a challenge due to the confidence crisis among bank depositors,” he added.
Customers did not get their money when they wanted to get back their deposits. This crisis has become a challenge for bank managements.
He said the allegations of siphoning of money say they often take place through import-export. This charge is the highest for import of capital machinery.
“But the information that is being circulated on money laundering is not really true. The amount of money that Bangladeshis are supposed to keep in Swiss banks may not be too much,” he said.
The defaulted amount rose to Tk74,148cr on June 30, from Tk 62,172 crore in December last year, BB data show. The defaulted amount is 10.14 per cent of the Tk 731,000 crore credit disbursed by 57 commercial banks.
The default loans of eight state-run and specialised commercial banks amounted to Tk40,098 crore, while it was Tk31,729 crore for private banks and Tk 2,321 crore for foreign commercial banks.
BIBM director general Tawfiq Ahmad Chowdhury said good governance was implemented in the banking sector worldwide. “But our boards here are busy with loan sanctioning rather than implementing good governance. The fundamental task of the board of the global banking system is to formulate and monitor policies. But there is no circulation of good governance in Bangladesh,” he added.
Sonali Bank's former managing director, SA Chowdhury said, "The extreme deterioration of values is being seen everywhere in the banking sector. People are forgetting everything due to consumer economy.”
“Due to corruption and nepotism, people's confidence in banks is declining. People are no longer able to trust the banks,” he noted.
SA Chowdhury emphasized improvement of trust on bank.
He advised the formation of a Financial Ombudsman to listen to people’s complaints.
Former managing director of Meghna Bank, Nurul Amin, alleged that the board of a bank was the main crime cycle.
Giving an example of a foreign bank, he said that a bank of 200 years has collapsed due to just one person's crime.
He said the bank's confidence crisis is worse than that of a default loan.
“The image crisis is very bad for a bank. Ten per cent of the default loan is unusual for the banking sector,” he added.
Professor Yasin Ali, former Executive Director of Bangladesh Bank, said morality was very important especially in the banking sector.
“In all cases, someone has to be a role model. But if the bank manager is a criminal, then he cannot be made a role model,” he said, adding, “The defaulters should be punished. They are punished in all the countries of the world.”