The average spread between lending and deposit rates of banks crossed 5.50 per cent despite the central bank's directive to bring down the gap to the level below 5.0 per cent, said sources with the Bangladesh Bank (BB).

Twenty-nine banks are not complying with the directive of the central bank on cutting the spread between interest rates. The spread between lending and deposit rates of the banks is more than 5.0 per cent, the latest data available with the BB shows.

Of them, six banks have the spread above 7.0 per cent and three banks between 9.0 and 12.44 per cent, according to data available with the central bank.

The lending rate means the interest rate a bank charges on a loan and the deposit rate means the interest rate it offers to a client on a deposit.

In August alone the banks' average spread stood at 5.56 per cent against 5.47 per cent in July last, as per the BB data.

The banks' average lending rate in August was 13.90 per cent against 13.77 in the previous month.

On the other hand, the deposit rate increased to 8.34 per cent in August, up from 8.30 per cent in July, the data shows.

The spread increased due to raising the lending rates by banks, BB sources said.

Most depositors are of the view that the banks make profit at their cost as the banks gain from the high spread.

In a meeting of bankers last month, all banks were told to comply with the BB directive on cutting the spread to the level below 5.0 per cent.

Chief executives of all banks attended the meeting, presided over by BB Governor Dr Atiur Rahman.

In that meeting, the BB placed a report on the rates of interest on credit and deposit for the month of July last.

The report said the upper cap on the rate of interest on credit was withdrawn earlier. It resulted in an upward trend in the rate of interest on both credit and deposit.

A central bank official said an unhealthy competition was going on among the banks in mobilising deposits. So they were offering higher interest rates on deposits, and as a result the rate of interest on credit was also going up.

The BB official said the spread in the private and foreign banks was much higher than that in other banks.

A bank was fined under the Banking Company Act for offering a higher interest rate than its official rate, said the report.

The BB report also said the credit flow to the small and medium enterprise (SME) sector was drying up due to the higher rates of interest.

A high official at a first generation private bank blamed some weak banks for ruing the healthy competition in the banking sector.

These banks resort to various ill practices to attract depositors, the official said, requesting not to be named. "As a result, other banks have to increase their rate of interest as well."

Another official at a private bank said if the rate of interest on deposit could be kept low, the rate of interest on credit would have also remained low and, resulting in the decline in spread.

He said the central bank should strengthen monitoring so that the banks do not go for any unhealthy competition.

News: The Daily Financial Express/Bangladesh/21th-Oct-12

 European leaders agreed Friday to police thousands of eurozone banks beginning next year as they sought to create much-needed jobs in their austerity-battered economies.

By the close of a two-day summit, France and Germany had patched up differences over how to beat the debt crisis, with the new watchdog for 6,000 banks a key condition for allowing a dedicated rescue fund to re-float troubled lenders. Leaders cited "significant progress" on a 120-billion-euro ($155-billion) package of measures to try to kickstart a climb out of recession as social and political unrest hits Spain as well as Greece.

But the bank deal appeared to come too late for Spanish lenders, who need recapitalisation to the tune of some 40 billion euros that Madrid had hoped would not be added to its public debt burden for fear of sparking new pressures on money markets.

German Chancellor Angela Merkel told reporters that direct recapitalisation by the eurozone rescue fund could not be retroactive, that it "will only be possible for the future."

Fellow hardliners the Netherlands and Finland adopted the same view when finance ministers from the three states met last month in Helsinki, seemingly reversing plans carefully laid down by the eurozone in June.

France is still pleading for the "Helsinki" trio to come round. A top EU official speaking anonymously after the summit ended said Paris has concerns about spillover effects from Spain, and maintained Merkel's remark came as "a surprise" as the 27 EU bloc leaders "did not settle this."

This official said the Spanish bank bailout could benefit from some direct recapitalisation later in the process, once the watchdog is up and running -- supposed to be later in 2013.

Spanish Prime Minister Mariano Rajoy faces growing political problems with a general strike called for November 14 and key elections in the autonomous Basque Country on Sunday and independence-minded Catalonia next month.

Rajoy said the direct aspect of recapitalisation was not an "urgent" issue for Spain, while talk of sovereign aid -- expected to take the form of a credit line initially -- also remains on the back-burner.

With market pressures considerably eased since the summer, the fresh commitment bird's eye bank supervision led by the European Central Bank is supposed to anchor a re-designed economic and monetary union.

Leaders are beginning to believe -- after three years in full crisis mode -- that the euro can be made more attractive to influential EU states still outside the currency bloc like Poland, one of the bloc's strongest economies.

After an 11-hour session into the wee hours to reach the bank supervision deal, Merkel said it was about ensuring a "solid legal framework" as the ECB puts in place "hundreds" of staff.

The target date here is January 1, 2013, Merkel citing a need for "democratic legitimacy," including a change to voting rights to assuage concerns in non-euro territories where eurozone banks operate, namely the global financial centre of London.

The eurozone voice at the ECB could have out-voted non-euro members in adjudication by an existing network of national supervisors at the European Banking Authority, so it was agreed this would be re-weighted, an "unprecedented" decision according to the earlier participant.

Difficult decisions remain to be taken in two more summits before Christmas, as seen by Britain's David Cameron threat to veto the European Union's budget for the rest of the decade and snub the Nobel Peace Prize-giving ceremony in Oslo in December.

News: The Daily Independent/Bangladesh/21th-Oct-12

City Bank Limited has signed an agreement with Siemens Bangladesh Limited at City Bank head office recently, said a press release.

Sohail R. K. Hussain, additional managing director of City Bank, and Shouvik Bhattacharya, managing director of Siemens, signed the agreement. Also some high officials from both the organisations were present at the signing ceremony.

Siemens Bangladesh Ltd, a global power house in electronics and electrical engineering, operating in the industry, energy and health care sector in Bangladesh from 1974 has recently been approached with the product of American Express corporate Cards by City Bank which is an innovative expense management solution for Siemens employees working across the country.

As per the agreement City Bank American Express Corporate Cards automates the official expense management process of a organisation that drive down the processing cost and free up the valuable time of the employees.

News: The Daily Independent/Bangladesh/21th-Oct-12

The Malaysian government is working on proposed free trade agreement with Bangladesh to boost bi-lateral trade between the two countries, said Malaysian High Commissioner (HC) in Bangladesh.

“We’ve completed the free trade agreements with India and Pakistan. We want to do the same with Bangladesh. We are now working on details of the agreement,” Norlin Othman, the High Commissioner said in an exclusive interview with BSS.
Bangladesh exported products worth $43.87 million to Malaysia while imported goods valued at $1,759.60 million in 2010-11 fiscal year from them.

Bangladesh exports to Malaysia include foodstuff, jute goods and apparels and imports primarily involve machinery and electronics goods.

Othman said Malaysia has initiated the proposal to sign a free trade agreement, which would come into effect after both sides agree on it. “It took two years to finalise an agreement with India, but I am optimistic it would not take too much time for a similar deal with Bangladesh.” “The proposed agreement is now at the discussion level. It will be signed once both sides reach a consensus on it.

So, let the two sides work complementary to each other. We must follow the rules of World Trade Organization (WTO) to finalise the deal,” said the diplomat.

Asked about the bilateral trade that is heavily tilted in favour of Malaysia, she said, “Of course there is a trade gap, but Bangladesh has huge potential to increase its export to Malaysia.”

She said Malaysia with 28 million people does not require lot of food or garment products, but it needs some high-end products which Bangladesh can supply and thus expand its market share.

The HC, however, said although Bangladesh’s export to Malaysia is lower in volume, the services Bangladesh providing to Malaysia is higher.

“What Malaysia is encouraging is that either you increase your volume of exports or produce products that Malaysia needs. I think it will help reduce Dhaka-Kuala Lumpur trade gap,” said the Malaysian HC.

Othman said a good number of Bangladeshi entrepreneurs are doing business with Malaysian enterprises in service sector including restaurants, small shops and furniture factories.

On the other hand, she said, many Malaysian entrepreneurs are working in high-tech industries including issuing machine readable passport (MRP) and setting up small independent power plants in Bangladesh.

“Therefore, we are contributing to the economies of the two countries. But, the fact is that this is not receiving publicity as it should be,” she pointed out.

News: The Daily Independent/Bangladesh/21th-Oct-12

Bangladesh Bank Governor Dr Atiur Rahman receives donation from Association of Bankers Bangladesh for Bannaya Prani Sheba Foundation at a function at Sreemangal, Sylhet on Saturday.

News: The Daily Sun/Bangladesh/21th-Oct-12