Avoiding abrupt regulatory changes is essential

Mashrur Arefin
Managing Director & CEO
City Bank

Since 2009, City Bank's Offshore Banking Unit (OBU) has been supporting trade finance for export-oriented businesses. Following regulatory changes introduced by Bangladesh Bank through FE Circular 19 on November 29, 2023, and the subsequent Offshore Banking Act 2024, the bank has expanded its services to include both retail and corporate customers. Initial customer interest has been highly positive. Although there was a learning curve at first, as we had to educate customers about offshore banking accounts and their associated benefits, we are now observing encouraging responses from both domestic and international clients.

The features offered by OBU fixed deposit accounts are largely similar across banks, including attractive interest rates (currently up to 7.07%), availability in multiple currencies, exemptions from tax and excise duties, and the ease of repatriating funds abroad. At City Bank, we offer a streamlined account opening process through our online OBU Account Opening portal. We also provide a 24/7 dedicated hotline to address any inquiries related to OBU accounts. Additionally, depositors maintaining a balance of USD 100,000 or more are eligible for complimentary membership in our Citygem priority banking service. This membership includes exclusive benefits such as access to the American Express Lounge in Dhaka, airport meet-and-greet services, and a Priority Pass for lounges at international airports. They will also have a Personal Relationship Manager assigned to them. These exclusive offerings have attracted significant interest from existing clients and generated buzz among potential depositors.

In the current environment of high inflation and rising interest rates, foreign financing remains more cost-effective than domestic options. OBUs present a valuable opportunity to enhance trade finance in Bangladesh by increasing the inflow of foreign currency liquidity, which could help alleviate the ongoing pressure on the country's foreign currency reserves.

Expatriate Bangladeshis often express concerns about the financial stability of certain banks in Bangladesh, which contributes to their hesitation in depositing funds into Offshore Banking accounts. Media reports of banking scandals and irregularities have further fueled this negative perception. To address this, it would be beneficial for Bangladeshi banks to obtain credit ratings from internationally recognized agencies such as Moody's or Fitch, which would provide greater transparency and assurance regarding the health of these institutions to expatriates and foreign nationals alike.

The central bank has played a key role in shaping the new landscape for OBU. We hope the central bank maintains a consistent approach to OBU policies and avoids making any drastic regulatory changes in a short period.