Bangladesh Bank governor Atiur Rahman on Sunday said the reputation of the central bank was under threat of being tainted due to some financial irregularities in the state-controlled banks in recent times. The scams also put the image of the country’s banking sector under threat, he said. The BB governor made the comments at the inaugural session of the two-day Annual Banking Conference 2013 organised by the Bangladesh Institute of Bank Management at the BIBM auditorium in the capital. He inaugurated the conference.
The country’s banking sector has recently faced severe criticism from different quarters due to a number of financial scams perpetrated in the state-owned commercial banks and specialised banks.
Atiur said that the BB had recently taken a number of fresh initiatives to prevent irregularities in the banking sector.
The central bank has started introducing strategic changes in its existing supervision techniques for ensuring financial stability in the banking sector, he said.
‘As part of the BB effort at ensuring good corporate governance in bank management, monitoring has been enhanced in the areas of responsibility and accountability of the board of directors including chairmen, directors and chief executives of the banks in financial, procedural, administrative and policy-related issues,’ he said.
Internal control structure of the banks have been sought to be strengthened and the process of risk identification, measurement and mitigation has been attempted to be streamlined in the light of international best practices, Atiur said.
Former BB deputy governor Khondaker Ibrahim Khaled said that most of the state-run banks had failed to maintain the required capital adequacy ratio in the third quarter (July-September).
Some of the state-run banks maintained negative capital position in the last quarter, he said.
‘The state-run banks have plunged into the worst condition due to the financial scams,’ he said.
The BB is not enjoying identical power in controlling the state-run banks and the private commercial banks, he said.
The BB can dissolve the board of any PCB but it has no such power in case of the state-run banks, he said.
‘So, the BB can not control the state-run banks fully. Under the circumstance, the situation of the state-run banks has recently maintained a decreasing trend,’ Ibrahim Khaled said.
BIBM director general Toufic Ahmed Choudhury in his key note paper said that the country’s banking sector had recently experienced a few cases of unethical practices and irregularities.
The frequency and magnitude of such fraudulent activities have inflicted huge burden on the banking sector and impacted the public confidence and reputation of the banking industry, he said.
The occurrence of fund embezzlement has also raised serious doubt in the minds of depositors, regulators and stakeholders in the banking sector about the financial discipline and operational standards, he said.
Toufic said, ‘It is generally recognised that such type of unscrupulous activity can not take place without the active collaboration or passive approval of the concerned bankers,’ he said.
With the growing complexity and challenges, effective risk-based supervision is the need of the time, he said.
The annual conference will cover four sessions while national and foreign academicians, professionals and researchers will place their literatures on the perspective of the local and the international economic and business situation.
-With New Age input
