The banking sector is left with only Tk 3,364 crore of idle money, not Tk 90,000 crore as reported in the media, Bangladesh Bank said yesterday.

The banking regulator said the amount is not too big compared to the number of banks.

Currently, there are 56 banks in the country and often media reports mentioned that the banking industry has Tk 90,000 crore to Tk 100,000 crore of idle money.

“It's not true,” BB said in a statement. “After meeting the statutory requirement, banks invest its funds in the government securities, which are safe and profitable.”

The BB also said the call money market remains quite stable with around 7 percent interest rate.

The central bank data shows banks' capital adequacy ratio has also increased to 11.35 percent, significantly higher than the regulatory requirement under Basel II of 10.51 percent.

Despite odds, loan disbursement by the banks also increased by 13.99 percent in 2014 compared to the same period a year ago, the BB said.

Europe's banks need to cut costs by a fifth and simultaneously grow revenues by 15 percent just to get their profitability to match their cost of capital, a study said on Monday.

European banks' return on equity (RoE), a key measure of profitability, is likely to average less than half their cost of capital again this year, lagging well behind US rivals as lenders struggle with high costs and weak economic growth, according to a study by consultancy EY.

That means job cuts are inevitable and restructuring is likely to gather pace this year. EY's European Banking Barometer showed RoE is expected to improve by 1.6 percentage points this year on average, but that would only lift it to 4.4 percent, compared with an average cost of capital of 9.4 percent and average returns of 12.2 percent for US banks.

EY surveyed 226 senior bankers in 11 markets. The findings indicate banks in the euro zone in particular continue to struggle to generate returns anywhere near what it costs them to raise capital, meaning investors would be better off putting their cash elsewhere.

The euro zone's banking supervisor has said returning to sustainable profitability is the industry's biggest challenge, and firms may need to sell off businesses.

British banks have restructured more and their returns are predicted to climb to 9.5 percent this year, their highest since 2007, EY said.

EY said 69 percent of respondents to its European survey said they were considering restructuring options, including selling or buying assets or forming partnerships or joint ventures, up from 55 percent a year ago.

"Both weaker growth and structural reform are forcing banks to seriously reconsider the viability of some business units. In particular, we may start to see concrete evidence of the effects of the structural reform agenda on the universal banking model," said Steven Lewis, EY's global banking & capital markets analyst.

Costs at Europe's banks are expected to fall by an average of 1.6 percent this year, and respondents predicted revenues would grow by 3.5 percent, both improvements on last year, EY said.

Staff costs represent about 54 percent of operating costs, and 43 percent of respondents said they expect headcount to fall this year. The biggest cuts are expected in Nordic countries, Italy and Austria, EY said.

Muhammed Ali, managing director of United Commercial Bank, and Amjadul Ferdous Chowdhury, managing director of Imperial Hospital, pose after signing a deal on syndicated term loan of Tk 250 crore for the hospital, at a local hotel in Dhaka on Sunday. Photo: UCB

United Commercial Bank has arranged a syndicated term loan of Tk 250 crore for Imperial Hospital (IHL), the bank said in a statement yesterday. 

IHL will use the loan to set up a 353-bed tertiary care and referral hospital in the port city of Chittagong, according to the statement.

Muhammed Ali, chairman of UCB, and Amjadul Ferdous Chowdhury, chairman of Imperial Hospital, signed an agreement on loans on Sunday.

UCB is the lead arranger of the fund with Dutch-Bangla Bank, Shahjalal Islami Bank, Standard Bank, NRB Global Bank, Bangladesh Commerce Bank, and Fareast Finance and Investment, involved in the lending syndicate, it said.

Some banks are adopting stricter lending criteria for China's state-owned enterprises (SOEs), demanding collateral from some companies they used to deem as safe as government debt, as Beijing tries to reform its bloated firms and the economy slows.

Singapore's DBS Group, which recently suffered a loss on a bad loan to an SOE-related firm it had assessed as risk-free, plans to launch a 'decision grid' to assess the creditworthiness of SOEs, according to draft internal risk guidelines reviewed by Reuters.

A banker at Taiwan's Chang Hwa Commercial Bank said that from the beginning of this year his bank would only lend to state-owned Chinese companies that provide collateral, in recognition that SOEs were no longer risk free.

Such changes in policy suggest some foreign banks are preparing for a rise in defaults in the world's second-largest economy, which is growing at its slowest pace in a quarter of a century and where the government is trying to make the state sector more efficient.

DBS will now lend more conservatively to SOEs seen as receiving less government support, as China plans to prioritise SOEs in strategic sectors.

The January-dated DBS document said: "Not all SOEs receive the same degree of government support. It is our further belief that the differentiation of such support will widen in the future as the government continues to pursue market economy."

DBS will now divide SOEs into tiers according to their likely level of government support, with subsidiaries considered more risky than top-level holding companies.

Group companies that are not consolidated into the parent SOE's financial statements will be evaluated as an ordinary borrower, the decision grid shows.

DBS effectively acknowledges that lenders can no longer take for granted implicit support from above.

DHAKA : Bangladesh Bank (BB) has planned making the country’s banking sector paperless, which will be a big step forward towards green transformation of the financial sector.
“We are committed to implementing a full scale IT based paperless banking operation in due course,” BB Governor Dr Atiur Rahman said, adding that a separate department has been established at the central bank to address the green issues in a broader manner.
The governor made the announcement while launching the Energy Efficiency Engagement Event at a city hotel yesterday, reports BSS.
Observing that transforming financial sector more eco-friendly is indispensible for ensuring an environmentally sustainable economic growth, he put green banking at the front of the forecourt of the agenda for large scale green transformation and said – “No doubt, green banking is a catalyst for green growth”.
Dr Rahman, who drove green banking in the country banking sector, appreciated Nordic Chamber of Commerce and Industry (NCCI) and Danish International Development Agency (DANIDA) for establishing the Energy Efficiency secretariat in Bangladesh.
“This initiative reflects a clear commitment of DANIDA and NCCI activities towards green transformation and green growth of Bangladesh,” he said. The governor also highlighted the different initiatives of the central bank to make the country’s banking and eventually the financially sector environmentally more responsible.
“Bangladesh Bank has been providing a range of policy and financing support to banks and FIs (financial institutions) for mainstreaming green banking into the core banking practices. These endeavors have been enhanced in the last couple of years,” the governor said.
He said so 47 green products have been included in the BB refinance scheme of which 23 are green energy.
“Shifting the investment from fossil-fuel to green energy is the only way for transforming economic growth paths. Assessment of environmental risks above the threshold limit is a must,” he observed.
Dr Rahman said Bangladesh maintained more than 6.0 percent real GDP growth over the last 10 years, which is poised to increase in the years ahead. To continue this growth momentum, it has been estimated that energy consumption should grow at the rate of at least 10 percent.
He said we understood most of the lenders are not familiar with Energy Efficiency Technology and approaches and require technical support to appraise and manage loans for Energy Efficiency projects.
“In this scenario, we do expect the Energy Efficiency secretariat will look into these challenges for converting them into opportunities which will indeed give impetus to the green transformation, green growth of Bangladesh economy,” the governor said.
Denmark Ambassador Hanne Fugl Eskjaer, Head of Petroleum and Mineral Resources and Engineering Department, BUET Dr. Mohammad Tamim, ABB Solutions in Energy Efficiency Country Manager Rajarshi Banerjee, Danida Senior Advisor Stephan Skare Enevoldsen and NCCI President Shamim Ul Huq also spoke on the occasion.