Bangladesh Bank on Wednesday said deficiency of corporate governance caused scams at some state-owned commercial and specialised banks resulting an adverse impact on the country’s financial stability. Due to the financial scams and politically motivated loan disbursement, five banks held 54.50 per cent defaulted loan in the banking sectoras of December 2013, according to the Financial Stability Report 2013 prepared by the central bank.
The five banks are – Sonali Bank, Janata Bank, Agrani Bank, Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank.
BB governor Atiur Rahman unveiled the Financial Stability Report at the central bank headquarters in the capital while senior officials of the central bank and managing directors of the scheduled banks were present.
The BB data showed that defaulted loans in the five state-owned commercial and specialised banks stood at Tk 22,107.05 crore against the total non-performing loans of Tk 40,583.01 crore as of December 31, 2013.
The stability report said that only 10 banks had held 48.20 per cent stressed assets in the banking sector at the end of December 2013.
Stress advances, which are total of gross classified loans and rescheduled loans, can be taken as an indicator to measure the asset quality of banking sector that could originate from wrong appraisal that leads to diversions, over-leverage and frauds, the report said.
Among the worst 10 banks, which held significant amount of stressed advances in the banking sector, three are state-owned commercial banks, three are specialised banks and four are local and foreign commercial banks.
Stressed advances in the 10 banks are higher because of lack of efficiency and transparency in the credit approval process, credit administration, credit monitoring and recovery and poor selection of borrowers, politically motivated lending, and negligence in risk management practices, the report said.
BB deputy governor SK Sur Chowdhury told reporters at the stability report’s unveiling session that a major amount of classified loans had become bad loans at the end of December, 2013 which may put and adverse impact on the financial sector in the months ahead.
A bank has to keep 100 per cent provision against its bad loans, the worst category of defaulted loans, resulting that such type of loans hit profitability of the bank.
The BB data showed that the bad loans stood Tk 31, 920.24 crore, or 78.65 per cent, against the total defaulted loans of Tk 40,583.01 crore in the banking sector as of December 31, 2013.
The recovery of the bad loan will be difficult more if the banks failed to recover in the shortest possible time, Sur said.
The banking sector will face more crises if the bad loans increase, he said.
Sur asked the banks to maintain data integrity when they send the reports to the central bank, otherwise the central bank will not be able to make proper statement.
BB governor Atiur Rahman said that the central bank would not give any type of waiver to any person, irrespective of his/her influence, for any irregularities.
He asked the managing directors of the banks not to sign the improper internal control and compliance reports before sending it to the BB.
The BB officials are now discussing with directors of different banks in a bid to ensure transparency of the boards of directors, he said.
The BB will strengthen its surveillance activities on the boards of directors of the scheduled banks, he said.
‘Some banks are now facing weak situation due to lack of good governance. We are trying to restore good governance in the banks’, the BB governor said.
-With New Age input
