A file photo shows branches of Bangladesh Krishi Bank and scam-hit BASIC Bank at Karwan Bazar in Dhaka. The government has decided to amend at least three acts including the Bank Company Act (1991) that regulate banking operations to include bailout measures to shore up troubled banks with injecting prompt liquidity assistance.

The government has decided to amend at least three acts including the Bank Company Act (1991) that regulate banking operations to include bailout measures to shore up troubled banks with injecting prompt liquidity assistance. Bangladesh Bank is now at the final stage of drafting a bank resolution and lender of last resort (LOLR) facilities so that immediate liquidity measures could be taken either by the finance ministry or by the BB in case any bank or financial institution collapses, a senior finance ministry official said. The measures will be purported to enabling the BB to intervene immediately in the event of any ‘failure’ on the part of a bank to cope with any emerging adverse situation, and take appropriate remedial measures. Other laws to have amendments are Bangladesh Bank Order-1972 and Deposit Insurance Act. The decision was taken in the first week of current month at a meeting with finance ministry officials and a delegation of International Monetary Fund. A number of senior BB officials also attended the meeting. ‘We have decided to put in place a LOLR mechanism to help intervene into a beleaguered bank’s affairs of severe capital crisis. The proposed contingency plan will require bringing amendments to a number of acts,’ a senior finance official told New Age on Saturday. On the other hand, SM Moniruzzaman, executive director, BB said the proposed LOLR was in its final stage that is being prepared to tackle any debacle of a bank. ‘The proposed LOLR is in its final stage and before enforcing the measures, bringing amendments to a number of acts including that of BCA (1991) will be required as such measures are new for our banking system,’ Moniruzzaman said. The BCA (1991) was last amended in middle of 2013, while the BB Order (1972) in 2003. The suggestion of IMF came against the backdrop of a good number of large loan scams that were unearthed in some of the country’s state-owned banks, particularly Sonali Bank and the BASIC Bank. The banks concerned are now faced with the problem of a large shortage of capital, a senior BB official said. A senior BB official said the proposed LOLR would help the BB, in case any bank — be it public or private — collapses or fails, to intervene promptly to shore up its financial position and protect the interest of depositors. Another top BB official who has been involved in the related process said he had almost completed the task of preparing an efficient bank resolution method, based on a number of in ternationally practised core fundamentals to deal with the problems of any troubled bank. These are : minimising financial and economic costs and contagion risks in case a bank faces the risk of collapse, ensuring protection to depositors, protecting shareholders’ interest, enacting proper legislation, enhancing supervision, increasing the implementation capabilities of any such bank, and strengthening the bank’s capital base. Besides, the proposed resolution guidelines will have a policy on how the BB could support a troubled bank with injection of fresh fund, a BB source said. ’The capital injection by the BB will be considered as the last option under the proposed framework in case all other opportunities of such a troubled bank are exhausted,’ the BB official said. He, however, ruled out the possibility of any immediate risk about the collapse of any of the country’s banks. Moniruzzaman said the proposed LOLR has an ‘emergency liquidity assistance’ regulation, which will elaborate bailout measures for a bank in need.