Speakers opine at BIBM workshop

Speakers at a workshop in the capital on Thursday expressed their grave concern over the increasing trend in classified loans in the country's banking sector.

They also said if the situation does not improve, the banking sector will be in dire straits, and suggested strengthening monitoring of the central bank in this regard.

Speakers made the observations at a workshop on "Treasury Operations of Banks 2016" at Bangladesh Institute of Bank Management (BIBM). BIBM Director General Dr. Toufic Ahmad Choudhury presided over it.

The discussants of the programme were Managing Director and CEO of NRB Bank Ltd Md. Mehmood Husain, Additional Managing Director and Chief Risk Officer of The City Bank Ltd Faruq Moinuddin, and BIBM Faculty Member Syed Mohammad Bariqullah.

Professor of BIBM Md. Nehal Ahmed presented a paper titled 'Review Paper on Treasury Operations of Banks 2016'.

Dr. Toufic Ahmad Choudhury said the banks' classified loan situation is really an alarming signal for the banking sector.

"I think the sector will have to face manifold challenges, if the scenario does not change," he also said.

Mehmood Husain said effective implementation of various treasury-related tools is important for efficient treasury operations.

He also emphasized increasing capacity of the banks' senior management to manage various important issues of treasury operations successfully.

"Treasury operations are getting more and more complex day by day, for which continuous knowledge upgradation and capacity building are important," he added.

Nehal Ahmed in his paper depicted the state of banking sector, classified loans and various dimensions of treasury operations.

The paper showed that in 2016 classified loans of all the banks was 9.23 per cent. Classified loans in the specialised banks (SBs), state-owned commercial banks (SoCBs), private commercial banks (PCBs) and foreign commercial banks (FCBs) were 26.02 per cent, 25.05 per cent, 4.58 per cent and 9.56 per cent respectively.

It also mentioned that the classified loans, particularly bad and loss, were almost the same in 2016 and 2015, which was 84.4 per cent and 84.7 per cent respectively. In 2016, sub-standard and doubtful loans were 10.2 per cent and 5.4 per cent respectively.

The paper also showed that classified loans is more than 20 per cent in nine banks, more than 10 per cent in 12 banks, and more than five per cent in 26 banks.

The banks have maintained cumulative provisions amounting to Tk 307.4 billion in 2016, which was Tk 41.3 billion higher than that of 2015. The shortfall in provision increased significantly and reached Tk 54.7 billion in 2016.

Nehal Ahmed also identified some challenges in treasury operations of the banks, including shallow and almost non-existent secondary bond market, higher non-performing loan (NPL), overnight market liquidity problem, lack of investment opportunities, and problem in asset-liability management.

He also made some recommendations to overcome the challenges, including a more consistent auction calendar to ensure proper asset-liability management.

He opined that the banks should search for various financing options, and Bangladesh Bank (BB) may initiate a programme to allow funding from its surplus foreign currency to encourage the local banks' growth.

Besides, BB should initiate an open market operation for treasury securities. To overcome increasing NPL problem risk-based loan pricing should be introduced, and recovery of NPL should be emphasized, the paper added.