BB asks 15 banks to improve financial health

Bangladesh Bank yesterday passed directives on 15 banks through its observers and coordinators to improve their financial health.

The central bank directives came up at a meeting with the observers and coordinators, presided over by Bangladesh Bank Governor Abdur Rouf Talukder, at the Bangladesh Bank's Motijheel headquarters.

Currently eight banks have observers -- Sonali Bank, Agrani Bank, Rupali Bank, Janata Bank, Bangladesh Krishi Bank, ICB Islamic Bank, Islami Bank Bangladesh and First Security Islami Bank.

Meanwhile coordinators have been appointed in seven banks -- National Bank, AB Bank, Padma Bank, One Bank, BASIC Bank, Bangladesh Commerce Bank and Bangladesh Development Bank.

The central bank appointed them to closely monitor the banks on detecting massive loans irregularities and scams.

After the meeting, Bangladesh Bank Executive Director and Spokesperson Md Mezbaul Haque told journalists that the governor had asked the observers and coordinators to improve the lenders' financial health.

The governor warned those lenders' management and board of directors that the central bank will not show any further sympathy, said Haque, also a coordinator at BASIC Bank.

The practice for appointing observers started in 1994, when it enlisted Oriental Bank as a problematic lender and appointed an observer to address the worsening corporate governance at the bank, which was later renamed as ICB Islamic Bank.

However, those problem banks' financial health has continued to deteriorate despite the appointment of observers.

For instance, the volume of Janata Bank's default loans continues to rise despite the presence of a central bank observer.

Bangladesh Bank, back in November 2015, enlisted state-run Janata Bank as a problem bank and appointed an observer.

At the end of 2017, the bank's bad loans stood at Tk 5,818 crore. Then it rose to Tk 14,950 crore, which is about 11.4 percent of the banking sector's total default loans, at the end of March of this year.

Industry insiders said the accountability of the observers and coordinators must be ensured to address the deterioration of corporate governance in banks, otherwise the situation would not improve.

On the other hand, the practice of appointing coordinators started from this year after Abdur Rouf Talukder joined as the central bank governor.