Call for cuts in bank interest rates Kazi Akramuddin introduces his panel for FBCCI polls
Businesses on Tuesday urged the government to cut bank interest rates to minimise the operational costs of companies.
The business people also demanded a direct voting system in the election of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) to ensure more transparency and accountability.
The country got very little investment last year due to the high bank interest rates, said Nazrul Islam Mazumder, president of Bangladesh Association of Banks.
“The bank borrowers only enhanced their old bank loans.”
Mazumder spoke at a programme to introduce the panel of Kazi Akramuddin Ahmed, leader of the panel, for the FBCCI polls for 2012-14 to be held on Saturday, at Ruposhi Bangla Hotel in the capital.
If Ahmed got elected, his first assignment will be to have discussions with the government on how to lower the bank interest rates to 12 percent from the existing 16 to 18 percent, he said.
He also asked Ahmed to work to lower the bank deposit rate to 10 percent for healthy competition in the banking sector.
At the function, Selima Ahmed, managing director of Nitol-Niloy Group, urged the government to reduce traffic congestion, harassment of police and prevent smuggling of different goods so that domestic manufacturers can be more competitive.
She also stressed the need for ensuring more business facilitation to women entrepreneurs.
“But you have to ensure transparency and accountability in the FBCCI and I want direct election in this apex trade body.”
A strong research cell should be set up for the trade body, said Jashimuddin, FBCCI vice-president.
He blamed last year's poor foreign investment in Bangladesh on weak infrastructure and lack of gas and electricity.
Laos saw a foreign direct investment (FDI) of a total of $18 billion last year when Indonesia received $24 billion, he said. But Bangladesh could hardly attract $5 billion FDI a year at a time, he said.
The bank interest rate could not be reduced for tighter monetary policy of the central bank, said AK Azad, FBCCI president.
Bangladesh Bank uncapped bank interest rate from 12.5 percent a few years ago as per the recommendations of the International Monetary Fund, said Azad.
The central bank uncapped the interest rate justifying that if the bank interest rate is not increased, the flow of money will increase in the local market, and there will have a big inflationary pressure on the economy, he said.
Later, Ahmed introduced his panel for 30 directorial posts (15 from chamber group and 15 from association group).
News: The Daily Star/Bangladesh/22-Nov-12
BB ponders commission for foreign brokers
The central bank is reviewing the Securities and Exchange Commission's proposal to allow foreign brokerage houses to take share-trading commission for the investors they bring to Bangladesh.
The SEC's reasoning behind the proposal is that many brokerage houses are interested in bringing in foreign investors to Bangladesh -- but only in return for commission.
But the current rules do not permit the local brokers who act as agents for foreign brokerage houses to share commission with them.
The SEC sent a proposal to the Bangladesh Bank a year ago -- but it is yet to be approved. The SEC raised the issue at yesterday's meeting with BB Governor Atiur Rahman, representatives of Insurance Development and Regulatory Authority (IDRA) and other regulatory bodies.
Rahman right away called in the officials of the related departments and directed them to make a decision after a quick assessment, an official present at the meeting told The Daily Star.
Salehuddin Ahmed, the then BB governor when the proposal was made, said the permission for commission for brokerage houses abroad would be given but with strings attached so that “capital flight do not occur in the guise of commission”.
The conditions were: foreign brokerage houses must maintain full-fledged offices in Bangladesh, their commission cannot be more than the local brokerage houses and they cannot repatriate the full commission amount.
Also discussed at yesterday's meeting was the impending BB circular which stipulates all banks and non-bank institutions to forward reports on suspicious transactions to the central bank's financial intelligence unit.
News: The Daily Star/Bangladesh/22-Nov-12
HSBC completes its first trade in yuan
HSBC Bangladesh executed its first Renminbi (RMB) denominated cross-border export settlement for Avant Garde Fashion Ltd, a company based in the Dhaka Export Processing Zone.
The transaction -- said to reduce transaction costs and hedge foreign exchange risk -- comes at a time when Bangladesh's exports to China are expected to grow, according to HSBC's Global Connections report, by 15 percent a year between 2013 and 2015.
A survey recently conducted by HSBC in China found Chinese companies were willing to offer better pricing or terms in return for using the yuan to settle trade.
“Bangladeshi businesses doing international trade with China are starting to realise the significant monetary benefits of settling their trade in RMB. HSBC Bangladesh has achieved a significant milestone,” said Noel Quinn, HSBC's Asia-Pacific head of commercial banking.
HSBC's Global Connections report expects Chinese merchandise exports to grow most rapidly with other Asian economies: 15 percent annually from 2013 to 2015, compared to 12 percent globally in the same period.
Andrew Tilke, chief executive officer of HSBC Bangladesh, foresees trade between Bangladesh and other Asian countries, especially China, growing significantly.
"HSBC sees the future of intra regional trade growing and China is going to be one of the major drivers, with its currency RMB playing a significant role," said Md Mahbub-ur-Rahman, head of HSBC Bangladesh's commercial banking.
News: The Daily Star/Bangladesh/22-Nov-12
Banks' profit erodes
Most listed commercial banks are going through hard times in the second half of the year as a huge provisioning against non-performing loans pushed them to the negative profit zone.
Some banks even incurred losses in the third quarter as their core banking business was hit by low credit growth, according to their quarterly disclosures made public recently.
Of the 30 listed banks, 16 registered negative net profit growth year-on-year in July-September, six incurred losses and seven made positive growth.
Losses from the investment in the stockmarket also added to their worries, bankers said.
“Revenues fell in July-September mainly for two reasons,” said K Mahmood Sattar, managing director of The City Bank.
Interest rates were high, but demand for loans was low; and the banks also had to set aside huge funds to stay safe against classified loans, he said.
In the July-September period, the total specific provisions for classified loans at all listed banks doubled to around Tk 1,200 crore, compared to the second quarter.
Sattar said most of the burden of non-performing loans came from the ship-breaking industry.
“Steel prices dropped faster locally compared to the international markets,” he said.
He said, except for a few, net profit of all banks declined compared to the same period last year; even some of them incurred losses during the third quarter.
“The situation may worsen further in December when the new regulations on loan provisioning will come into effect,” he added.
BRAC-EPL Stock Brokerage said the third quarter saw the impact of provisioning like no other previous quarters and it became the single most vital element, affecting the banks' profitability.
“Loan provisioning is the biggest chunk of total provisions and in the third quarter it witnessed a skyrocketing growth on the backdrop of new loan provisioning guideline,” the stockbroker said in an analysis.
The new guideline will shorten the timeframe for loan classification, causing provisions to rise, even if the total amount of classified loans remains the same.
In June this year, Bangladesh Bank made it mandatory for banks to classify loans for non-repayment within three months instead of six months earlier, amid opposition from banks. The new rules aim to reduce the number of willful defaulters and benefit both banks and borrowers.
“Banks with medium or low asset qualities started to charge higher provisions early to smooth out their net profit even though one more quarter is left before the guideline will become effective,” said the BRAC-EPL analysis.
Nurul Amin, managing director of NCC Bank, said the negative earnings or losses were for temporary reasons, including higher loan provisioning and the new regulations, poor business and lower credit growth.
“Although the banks fared badly, I am optimistic as the demand for private sector credit will increase in the last quarter, helping the banks to maintain profitability like previous years,” said Amin, also the president of Association of Bankers, Bangladesh.
Ali Reza Iftekhar, managing director of Eastern Bank, also said majority of the banks' income from core business dropped significantly.
In addition, he said, many of the banks incurred losses from their investment in the stockmarket.
Although the banks' average exposure to the stockmarket remained low at 3 percent of their liabilities, the continuous fall in stock prices hit the portfolio of the banks and their clients.
News: The Daily Star/Bangladesh/22-Nov-12
A 11-member delegation of Woori Bank led by its President and CEO of Lee Soon Woon call on Bangladesh Bank Governor Dr Atiur Rahman at the latter’s office in Dhaka Tuesday.
A 11-member delegation of Woori Bank led by its President and CEO of Lee Soon Woon call on Bangladesh Bank Governor Dr Atiur Rahman at the latter’s office in Dhaka Tuesday. During the meeting, they discussed various matters including banking, industries, trade and investment.
News: The Daily Sun/Bangladesh/21-Nov-12