The British High Commission in Dhaka considers financial statements from the country’s 33 commercial banks to be non-compliant for processing a UK visa.

After extensive examination and discussion with the Bangladesh Bank Governor several times during last one year, British High Commission earlier selected 14 private and multinational banks as qualified to accept financial statements for issuing visas to Bangladeshi citizens, a senior official of the Banking And Financial Institution Division said.

A tug of war has been prevailing between the British High Commission and foreign ministry centering the issue during the last six months as the government sees it as a violation of the Vienna Convention 1961.

The British authorities, in the meantime, have suspended the vital move following request from Bangladesh’s foreign ministry.

The 14 banks those were selected by British High Commission are— AB Bank, National Credit and Commerce Bank, Eastern Bank Limited, Southeast Bank Limited, One Bank, Mutual Trust Bank, Brac Bank Limited, First Security Bank, Shahjalal Islami Bank, State Bank of India, Standard Chartered Bank, Citibank N.A., Bank of Ceylon and HSBC.

With some 47 commercial operating in the country currently, the central bank gave go-ahead for six new banks in April this year.

The UK Border Agency earlier said the UK government will accept financial statements from the selected banks from November 1.

Commenting on the issue, Bangladesh Bank Governor Dr Aitur Rahman told reporters that he knew nothing about the selection of banks for UK visa process.

Sources in the Banking Division of the finance ministry said a brief summary of the UK government’s move has already been sent to the foreign ministry.

The division has recommended wide-range discussions with the stakeholders to resolve the issue, sources said. A senior official of the Banking Division said they sought opinion from the central bank through a letter sent to BB Governor Dr Atiur Rahman.

After receiving feedbacks from Bangladesh Bank, the Banking Division will decide further course of action to address the discrimination by selecting a handful of banks from accepting financial statement by the UK authorities in the name of financial compliance in processing UK visa, the official added.

News: The Daily Sun/Bangladesh/14-Nov-12

Bangladesh Bank will impose a service charge on automated cheque clearance and electronic fund transfer from the beginning of next year, said a circular yesterday.

A Bank can charge its customers a maximum of Tk 50 plus value-added tax for high-value cheques (Tk 5 lakh and above) and Tk 7 plus VAT for regular-value cheques (under Tk 5 lakh).

And for electronic fund transfer, a bank will be allowed to charge a maximum of Tk 7 plus VAT.

BB, on the other hand, will take Tk 25, Tk 5 and Tk 5 from the charges for high-value cheque, regular cheque and electronic fund transfer respectively.

In the circular, the central bank said it has been allowing the banks to use its infrastructure free of charge to provide the services to their customers for around two years now.

“Though the systems were installed with the assistance of the British government, the BB has been bearing the operating costs,” said the circular.

“It [BB] has decided to impose the charges for maintenance and covering the operating costs,” it said.

A BB official said the central bank requires nearly Tk 25 crore per year to run the system smoothly.

Of the cost, Tk 11 crore is spent for maintenance and the rest as depreciation for machines.

Bangladesh Automated Cheque Clearing House consists of two components -- Bangladesh Automated Cheque Processing System (BACPS) that replaced the earlier paper-based manual cheque clearing system and Bangladesh Electronic Funds Transfer Network (BEFTN), an inter-bank electronic funds transfer system -- to help the banking sector transact smoothly.

With the initiative, duration of cheque clearance reduced and its volume increased significantly, said BB officials.

Under the automated system, Tk 5,000 crore on average is cleared and transferred through the BACPS and BEFTN per day.

News: The Daily Star/Bangladesh/14-Nov-12

Anti-Corruption Commission (ACC) will interrogate 14 senior officials of Janata Bank Limited (JBL) from November 18 next as part of its investigation into the non-funded portion of the Hall-Mark loan scam, officials said.

The anti-graft watchdog Monday sent notices to the JBL officials concerned asking them to be physically present and correctly response to the queries of its inquiry team on November 18 and November 19 (Sunday and Monday next).

The notices signed by chief of the six-member inquiry team and ACC Deputy Director Joynal Abedin Shibly were sent to the working places of the bankers.

Those who will be quizzed are JBL's local office branch officials - General Manager (GM) Aminul Islam, Deputy General Manager (DGM) Joynal Abedin, Assistant General Manger (AGM) Ruhul Amin Khan, Manager (Export) Alauddin Akhand and Export in-Charge Abdul Gafur; three officials of JBL's Elephant Road branch-Senior Executive Officer (SEO) AK Azad, SEO Shoaibul Kabir and AGM Mostaque Ahmed Khan; the bank's Bhaban Corporate branch officials-AGM Abdus Salam Azad, DGM SM Abu Hena Mostafa; and the rest-DGM (Ramna corporate branch) Mizanur Rahman, AGM (Ramna Corporate Branch) Kazi Raisuddin Ahmed, DGM (Foreign Exchange Branch) Sheikh Haider Hossain and AGM of the same branch Mizanur Rahman.

According to the notices, the first seven of the serial will be quizzed on Sunday and the remaining on the following day.

The commission took the decision to grill them before taking legal action in connection with the non-funded portion (over Tk 11 billion) of the total loan that had been swindled by the controversial group on forged documents.

"We'll ask them some important questions during the preliminary inquiry and lodge cases about the financial irregularities them on the basis of their response," chief of the ACC inquiry team Joynal Abedin Shibly told the FE.

Referring to interrogation of the Hall-Mark top officials, he said the controversial business group fraudulently took the non-funded amount from 26 commercial banks in the form of back to back LCs (letters of credit) and inland bill purchase (IBP).

Talking to reporters, ACC Commissioner M Shahabuddin said they have summoned 14 officials from five city branches of the state-owned JBL.

"Officials of 25 other commercial banks, mostly private ones, will also be interrogated in phases in connection with the largest financial irregularities in the country's banking history," he said.

News: The Daily Financial Express/Bangladesh/13-Nov-12

The recent order of the Chamber Judge staying the operation of the SEC notification regarding holding of 2.0 per cent share will not affect the securities regulator's relevant notification 'in general' as the order is applicable to only two petitioner sponsor-directors of a listed bank, lawyers said.

"The Chamber Judge passed the order in respect of only the petitioners-two directors of Jamuna Bank Ltd-in this case. So, it (order) will not be applicable to any other sponsor-directors of the listed companies," petitioners' counsel Advocate Shah Mohd. Ahsanur Rahman told the FE Monday.

Chamber Judge of the Appellate Division of the Supreme Court Justice Md Shamsul Huda stayed the operation of relevant parts of the Securities and Exchange Commission (SEC)'s notification regarding mandatory holding of 2.0 pc share until March 17, 2013.

After hearing a leave-to-appeal petition filed by the two directors against a High Court (HC) judgment passed in May this year, the Chamber Judge issued the order on October 30 last.

During the hearing, Attorney General Mahbubey Alam stood for the SEC.

In reply to a query whether other sponsor-directors, who earlier lost legal battle in the HC over the same issue, will get advantage in the apex court following this order, Mr Ahsanur Rahman said, "All concerned will not get the benefit, because it will depend on the particular grounds of each of the directors."

On November 22, 2011, the SEC imposed the mandatory provision for the sponsor-directors, other than the independent ones, for holding individually, at least, two per cent of their companies' paid-up capital.

Later, a section of the sponsors/directors including those two of Jamuna Bank took the SEC's notification to the HC that rejected some writ petitions filed by them.

Part of the notification on jointly holding 30 per cent company share by the sponsors/directors remained unchallenged.

On September 25 last, the Jamuna Bank directors filed the civil petition for leave-to-appeal with the Appellate Division against the HC judgment that summarily rejected their writ petition on May 22, 2012.

News: The Daily Financial Express/Bangladesh/13-Nov-12

It was 1992. I was then the public sector affairs head at the ANZ Grindlays Bank. At that time there was growing fear that there would be short supply of cement in the country. Subsequent to a heated debate in the parliament and newspaper editorials, the Trading Corporation of Bangladesh (TCB), the public sector trading entity, decided to import 100 thousand tonnes of cement from an East European country through open tender. We from the corporate bank seriously tried for the letter of credit (L/C) for that import and ultimately the L/C worth USD 22 million was opened through us. I being the Relationship Manager (RM) concerned was very happy about this and wanted to share the good news with my mentor Mr. Suronjon Chokroborty, the country credit manager. Mr. Chokroborty, asked me three questions- 1) Have you opened the L/C? 2) Have you realized the L/C commission and required margin? And 3) what are the shipment terms? My replies were- 1) It was obvious that we have taken the required L/C margin from TCB and realized the commission, i.e. our earnings, 2) shipment terms said, there will be three shipments through chartered vessels, first two carrying 30 thousand tones each and the last one 40 thousand metric tonnes 3) we have successfully routed the L/C to the foreign trade bank of the country through our Singapore branch. The `credit guru' Mr. Chokroborty smiled. While I pushed him hard to know the reason, he replied- there won't be any shipment unless the goods are being loaded into the mother vessel in the outer anchorage through `lighterage', since the said East European port does not have enough depth in the harbor for a 30 thousand tonne-ship. If lighterage cost is added to the export price, the contracted exporter would no longer be the lowest, he added. Believe you me, there was no shipment. The TCB had to trigger the performance bond issued and take the exporter to the court. I still wonder how Mr. Chokroborty could understand this. One answer could be, he really had all the qualities of a 'risk manager'.

Upon taking over as the public sector affairs head in 1992, I became a credit initial holder at ANZ. I was accredited as a certified credit professional at Standard Chartered Bank in 1996, after passing all the 14 module exams organized by the OMEGA, London. During my professional banking career, I did attend many basic, intermediate and advanced credit as well as risk management courses. However, I faced the real test of a credit officer, while I was made the Group Special Asset Management(GSAM) head at Standard Chartered Bank as well as while undergoing some audit assignments, following the Asian meltdown in 1997 and afterwards. I became a senior credit officer (SCO) at Citibank in 2005. My tremendous interest in macroeconomics, country risk and market risk along with complex audit assignments at Citi brought me this most coveted designation for a corporate banker. I was a business SCO till my last days at Citi and always tried my best to judiciously apply my credit discretion.

Young bank executives do often ask me, how a credit can go bad? My background as a Risk Officer for almost 15 years, taught me, credit usually go bad due to: 1) wrong borrower selection or inappropriate client need assessment, 2) wrong structuring of the facilities, 3) security or collateral shortfall, 4) weak internal cash generation in the business leading to recurring past dues, 5) lending on the basis of reputation of the borrowers without looking into their business fundamentals, 6) ignorance or under estimating the competition, 7) economic downturn or investment in the business segments other than the core ones . Added to these are, of course, weak credit assessments, failure to understand foreign exchange risk where cross border exposures are taken and corruption of the lending officers.

I have seen many credits going bad in Indonesia due to the failure of the lending officers to understand the foreign exchange fluctuation risks. Many loans in Malaysia went bad due to working capital being used to finance projects, almost similar to that of Bangladesh. In Taiwan many middle market loans went bad, because tenor provided was less than the trade cycle. Fierce competition in India forced banks to keep their eyes shut with regard to security or collateral shortfall or even weak financials. Most East African credits went bad due to failure in facility structuring and thereby borrowers were taking away huge sum of money for unrelated purposes. In Latin America cases were more related to taking large exposure in foreign currency, while in Europe and even North America, it was drastic reduction in underlying asset value or security provided, thereby making the `exit' impossible or extremely tough without huge `hair cut'.

One needs to do a `in depth' need assessment, that is how much the client needs to run his/her business and in what form. There is a saying- if you push out too much paste from a toothpaste tube; you won't be able to take this back. One has to look at the business model- how much is the projected turnover, what is the tenor of an end to end transaction and then derive at a figure. Even if one derives a figure, one has to know, how much of that would be bank financed and how much by the owners. I have also seen credit going bad, because the borrower needed the facility for 150 days, whereas the facility the bank offered was only for 120 days which the borrower had to accept under duress.

We have often seen, relationship managers marketing a credit under some agreed security and collateral parameters and disbursing the facility by keeping some documentation pending. If there is no `approval covenant' monitoring system, security perfection may remain pending for years and ultimately going bad. One should always try to take best of the securities or `nearest to clients' heart' properties mortgaged. Regular benchmarking of the security value vis-a-vis outstanding should be part of the credit culture.

I have also seen loans going bad due to non compliance with regulatory imperatives like waste treatment plant, river pollution or even neighborhood pollution in India. The social activist groups forced the agencies to close down the plants. Faulty title of land, grabbing of school or prayer places also created problems in erection of plants, thereby forced the companies to relocate and thereby increasing the project costs. Death of the key person without any proper succession also puts many loans into jeopardy. Business being not relevant to the core strength of the key entrepreneurs also didn't help many repayments. Most importantly one has to be with the winners in each of the business segment, not with the losers. If one would want to penetrate further into the client segment with some security/collateral or even inadequate cash generation or some other compromises, in that case pricing must be reflective of the inherent risk or government must subsidize to encourage money flowing to those hungry segments.

All along as a risk manager, I remembered what our credit teacher at Grindlays International Training (GRIT) in India Mr. Kartikeyan taught me- ` before approving and especially disbursing money against an approved credit, consider as if it was your own money'. He added-' taking risk is a banker's job, but it should always be a calculated risk with enough mitigants identified'. Kartikeyan further added- ` you only earn 4/5 percent net profit from a credit or loan but you lose the entire amount plus the reputation, if your credit discretion is not applied judiciously'.

(Mamun Rashid is a banker and economic analyst. E-Mail: mrashid1961@gmail.com)

News: The Daily Financial Express/Bangladesh/13-Nov-12