The World Bank mission observed that Bangladesh’s state-owned commercial banks may face massive problems in international business due to failure in following global standard.
The observation was made in the aide-mémoire of Bangladesh Financial Sector Mission of the global lender during its visit last month.
According to the mission, the foreign banks may refuse to open letter of credit (LC) with the Bangladeshi state-run banks because of poor state of operation.
However, the banking division secretary saw the mission’s observation nothing new. He said the World Bank usually comes up with such concerns and sets conditions when the country needs fund.
“The World Bank mission, as usual, has expressed deep concerns about the performance of the state-owned banks,” said Banking Division Secretary Dr Aslam Alam.
He said: “When we need fund, the World Bank presents tough conditions which are usually impossible to implement.”
The mission said due to huge capital shortfall the state-owned banks could not maintain Basel II and Basel III requirements.
Under the Basel framework, the commercial banks maintain the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR).
In LCR, the commercial banks will maintain high quality liquid assets that can be converted into cash to meet its liquidity needs for 30 calendar days and in NSFR the banks follow a new standard aiming to limit over-reliance on short-term wholesale funding assessment of liquidity risk across all on and off-balance sheet items.
The members of mission led by financial sector expert Shamsuddin Ahmed included financial sector experts Niraj Verma, Shah Nur Quayum, Damodaran Krishnamurti and Programme Assistant of World Bank Bridget Rosario. They stayed in Dhaka on 1-8 August.
The statistics showed Sonali Bank and Janata Bank had incurred losses of Tk12.8bn and Tk5.4bn respectively in 2012, but Agrani Bank and Rupali Bank made profits of Tk6.8bn and Tk1.3bn respectively in the same year.
Banking Division officials said the state-owned commercial banks have been making loss for a long time.
According to them, mismanagement was a major reason behind the loss. They said some voluntary works the banks had carried out on behalf of government were are also responsible for the chronic problem.
Due to influence of the government high-ups, the state-run banks have to approve large amount of loans to the corrupt businesses who present fake documents.
Most of such loans become default, putting the banking sector in trouble.
Besides, the loan scams of Hall-Mark and Bismillah Group left a long-time scar on the country’s banking sector.