Ethical leaders in banks are a must
We appreciate the candour with which a senior official of Bangladesh Bank (BB) spoke about the problems affecting our banking sector at a seminar organised by the Bangladesh Institute of Bank Management (BIBM) on October 22. While the problems have much to do with the lack of ethical leadership practices of banks' top management, precisely what steps are being taken to bring to heel the rampant corruption was not outlined. The whole country knows about non-performing loans (NPLs), loan scams and forgery, but it is good to know that the BB has pinpointed that ethical practices must constitute the guiding principles for a bank's leadership if good governance is to return to our banking sector.
The inability of banks' senior management to operate without interference from banks' boards results in violation of existing banking laws, regulations and constitutions. This must stop if the banks are to avoid the NPL trap. Again, while we fully agree with this statement, it is hardly a revelation and one must ask precisely what BB is going to do about the many malpractices that have engulfed the banking sector—both state-owned commercial and privately-owned banks.
A research study by BIBM tells us that as of June this year, banks' total NPLs stood at Tk 89,340 crore (or 10.41 percent of all loans). If we really want a change in this situation, we need to enable the central bank with real powers of oversight. Otherwise, the most BB officials can do is attend seminars and give advice on the do's-and-don'ts of a healthy banking system.
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