Nepotism, anomalies grip 9 new banks

DHAKA: Bangladesh Bank is concerned about newly established nine commercial banks as a central bank investigation reveals that the banks fell short of good governance since their inception.
“The managements of the banks, given permission on political consideration, are not being able to work independently,” said a top official of the banking regulatory authority.
Investigation found that the boards of directors are interfering into the banks’ regular activities. Even irregularities and nepotism appeared in recruiting the official and employees.
“It appears as if irregularities are the rules of the newly established banks,” said the official referring to the Bangladesh Bank investigation report, preferring anonymity.
The Awami League government in its last tenure gave approval to the nine banks__ NRB Commercial Bank Limited, NRB Global Bank Limited, NRB Bank Limited, Midland Bank Limited, Farmers Bank Limited, Meghna Bank Limited, Union Bank Limited, Modhumoti Bank Limited and South Bangla Agriculture and Commerce Bank Limited.
It was widely alleged at that time that all the banks got permission on political consideration. “And the end result is irregularities in the banks,” another official said.
The central bank investigation found that irregularities gripped the banks’ both management and financial sectors including loan disbursement, deposit collection, car purchase, recruitment and corporate social responsibility. The inference of boards of directors is everywhere.
“The situations at the banks are matters of frustration and concern... If it continues, country’s banking sector will fall in instability and the clients deposits would pose to risk,” a senior official quoted the BB report as saying.
The report carries many examples of anomalies. One example showed that Farmers Bank of former minister Dr. Mohiuddin Khan Alamgir paid Tk 1.53 crore as house rent in 2010-11 although the bank did not exist at that time.
An application of the Farmers Bank for payment was later turned down by the Bangladesh Bank.
Not only in case of advance house rent of one bank, the report mentioned about irregularities in many other cases for other banks including car purchase, branch establishment and recruiting relatives of members of the board of directors.
The investigation suggested actions against the chief executives of the banks, if necessary.
BB sources said a recent closed-door meeting warned the chairmen of board of directors as well as the chief executives of the newly established banks about their lack in governance in running the bank management as well as the banking activities.
The regulators in the meeting also asked the board of directors not to interfere anymore into the banks’ regular activities and not to pressurize the managing directors (MDs) concerned.
Governor Dr. Atiur Rahman told the meeting that the newly established banks are showing lack in both economic index and good governance. “If it continues, the banks will not survive... Ensure good governance instead of aggressive banking,” the governor was quoted by an official as telling the chairmen and chief executives.
When asked, MD of one of the nine banks, said: All new banks have the lack of good governance. But, it should be considered also that we are less experienced.
“Although we all know the causes bringing us in this situation, I can’t tell you about it anymore,” said the MD, preferring not to be named.