Financial institutions should focus more on rebuilding trust in the banking sector with tightening regulatory and supervisory structures, said an Indian economist.

Developing countries like Bangladesh have to strengthen banking regulation and supervision as it is the main instrument for rebuilding and bolstering of trust in the sector, said YV Reddy, a former governor of Reserve Bank of India. He said though the global financial crisis does not harm the trust of the banking industries in developing countries, it is time to emphasise on rebuilding of trust.

Reddy spoke at the 12th Nurul Matin Memorial Lecture on trust in banking, organised by Bangladesh Institute of Bank Management at Ruposhi Bangla Hotel in the capital yesterday.

The world is integrating more rapidly, he said. “Growing contagion risks from ever increasing integration with the global financial system are heightening the need of bolstering defences against erosion of trust.”

Bangladesh Bank Governor Atiur Rahman said experience shows that without firm ethical underpinnings, regulatory compliance responsibilities tend to get neglected particularly in good times, as in the run up to the global financial crisis.

He said the right ethical motivations will draw financial intermediaries away from financing of speculative and unproductive wasteful activities.

“It is some years now that we have adopted this approach in Bangladesh's financial sector; beginning with a BB guided initiative of mainstreaming corporate social responsibility in the institutional ethos and objectives of banks and financial institutions.”

That has in turn motivated and enthused banks and financial institutions in socially responsible financing and also environmentally responsible 'green' financing, with due attention to address ecological degradation and climate change threat concerns, according to the governor.

News: The Daily Star/Bangladesh/9th-Dec-12

Participants take part in a roundtable on mobile financial services at The Daily Star Centre in Dhaka yesterday.

Bangladesh can use mobile financial services not only to accelerate financial inclusion, but also to bring more than 85 percent unbanked population to the mainstream at a cost effective manner.

Despite the enormous demand for mobile phone-based financial services, a large-scale adoption is yet not seen.

Analysts and policymakers made the observation at a roundtable co-organised by The Daily Star, BRAC Bank and bKash at The Daily Star Centre yesterday.

Former adviser to caretaker government Abdul Muyeed Chowdhury moderated the programme.

Some of the discussants proposed to form a body comprising the officials of the central bank, the telecom regulator, microfinance regulator and other stakeholders, to promote the services.

“A body can be formed to identify the problems and expand the services further,” said Khondkar Ibrahim Khaled, chairman of Bangladesh Krishi Bank and former deputy governor of Bangladesh Bank.

He said microfinance institutions can be the alternatives to the banks in expanding the mobile financial services across the country.

Muhammad Abdul Mazid, former chairman of the National Board of Revenue, also echoed the views of Ibrahim Khaled on the coordination issue.

“There is a necessity of coordination among the regulators to avoid any conflicting situation,” said Mazid who presented a paper on mobile financial services in Bangladesh.

The coordination issue came to the limelight as mobile financial services in Bangladesh are a bank-led model run by mobile phone companies, which are regulated by the Bangladesh Telecommunication Regulatory Commission (BTRC).

Often these two regulators come up with separate orders having no coordination between them.

Iqbal Quadir, a director of bKash and a teacher at the Massachusetts Institute of Technology in the US, also raised the conflicting issues between the banking regulator and the telecom regulator.

AB Mirza Azizul Islam, another former adviser to caretaker government, also stressed the need for coordination in the regulatory framework of the Bangladesh Bank and the BTRC.

Abdul Muyeed Chowdhury also endorsed the idea of forming a separate committee to promote the services.

Bangladesh, with a population of 150 million and a per capita income of around $800, has seen a steady economic growth over the past 15 years. Poverty rates have halved from 60 percent in early 1990s to 31 percent in 2010.

This development has also been reflected in the growth of the country's financial sector, supported by the recent transformation in banking technology.

Speakers said despite these significant improvements, access to basic financial services is still restricted to only 15 percent people.

They said, for the financially excluded people, opening and maintaining bank accounts can be costly, complex and time-consuming due to a lack of education and awareness.

The central bank has allowed 23 banks to operate mobile financial services. But only two banks -- BRAC and Dutch-Bangla -- have come up with the services and registered 20 lakh clients so far.

“Identity is a big problem,” said Nazrul Islam Khan, secretary to the ICT ministry, on the security concern in mobile banking services.

Khan said he is trying to convince the government to make an accurate database of the population, which can be used for mobile banking services.

Mahabub Hossain, executive director of BRAC, a non-government organisation, said mobile banking can benefit the poor who feel shy to go to a bank. But further investment is needed to reach out to the people, he added.

Khalid Shams, former chairman of Grameenphone, said there are some risks in the service, but Bangladesh should seize the opportunity.

Shams, a former bureaucrat, also asked the operators to come up with new products for the targeted people.

Abul Kashem Md Shirin, deputy managing director of Dutch-Bangla Bank, said cost is not a big issue in mobile banking as there will be no cost if there is no use. On security concern, he said it is like using credit/debit cards and there is nothing to be anxious.

Michael Kuehner, chief executive officer of mobile operator Robi, said costing and convenience of services are the two main components in mobile banking.

Hassan Zaman, chief economist of the central bank, said they have planned to launch a financial literacy campaign to make people aware. On why other banks are not coming with the mobile banking services, he said may be it is for the investment and profit margin issues.

Zaman also said the BB is trying to disburse money to the targeted people through mobile phones under different government programmes.

Brig Gen (retd) Shahedul Anam Khan, defence and strategic affairs editor of The Daily Star, delivered a welcome address, while Shah Husain Imam and Salehuddin Ahmed, associate editor and managing editor of the daily, and Syed Mahbubur Rahman, managing director of BRAC Bank, also spoke.

News: The Daily Star/Bangladesh/9th-Dec-12

 Bangladesh Bank is scrutinising CIB (Credit Information Bureau) reports on the sponsor directors of the new five banks awaiting final clearance from the central bank for starting operation, BB sources said.

At the same time, the National Board of Revenue (NBR) is examining whether taxes are paid of Tk 4 billion deposited by each bank with BB as paid-up capital for having the licence.

The five banks are South Bangla Agricultural and Commerce Bank (SM Amzad Hossain), Midland Bank (M Moniruzzaman Khandker), Union Bank (former President H M Ershad), Meghna Bank (H N Ashiqur Rahman MP) and NRB Bank (Farasat Ali).

A senior BB official told BSS the central bank has been investigating whether there is any default loan in the name of sponsor directors.

News: The Daily Sun/Bangladesh/5th-Dec-12

The central bank of Qatar agreed in principle to deposit $1.8 billion with Bangladesh Bank, which would boost the country's foreign exchange reserve.

BB Governor Atiur Rahman held a meeting with the acting governor of Qatar Central Bank, Sheikh Fahad Faisal Al-Thani, in Qatar recently, according to a BB statement.

A technical committee of both the central banks will work out the terms and conditions.

A memorandum of understanding will be signed between the two central banks soon. The BB has already given the central bank of Qatar a draft MoU, which is being examined now.

The BB is expected to send a technical team early next year.

An analyst said it is a kind of borrowing by one central bank from another to boost forex reserves.

The foreign exchange reserve stood at $11.81 billion yesterday, which is equivalent to around four months' import bill of the country.

The decision of Qatar Central Bank followed earlier discussions between Prime Minister Sheikh Hasina and the emir of the Gulf state.

During the meeting, Qatar also wanted to recruit some experts from Bangladesh for advising its central bank.

News: The Daily Star/Bangladesh/5th-Dec-12

Bangladesh Bank has opened a probe into the whereabouts of the Sonali Bank money embezzled by Hall-Mark Group, on advice from the International Monetary Fund.

The financial intelligence unit of the central bank will also see whether the amount has been siphoned off abroad or kept inside the country, said BB officials.

In the backdrop of big scams in different state banks, the IMF may tag a major condition of conducting special diagnostic examinations in those banks before releasing the third instalment of its $1 billion loan for Bangladesh.

A central bank official said they have launched the drive as the IMF and the Anti-Corruption Commission (ACC) have enquired about the money.

The Hall-Mark Group and some other businesses swindled about Tk 3,557 crore from Sonali Bank showing fake documents. Of the amount, Hall-Mark alone embezzled Tk 2,626 crore.

An IMF team, now in Dhaka, wanted to know from the BB what steps it has taken to realise the amount. The mission has also enquired about the scam involving BASIC Bank, the official said.

Since November 27, the IMF has been in talks with the central bank over the Hall-Mark issues.

The BB has already informed the global lender that it has sought information relating to the Hall-Mark Group from all banks, and as soon as the information will be available, those will be conveyed to the IMF.

On realising the embezzled money, the central bank told the IMF that Sonali Bank has already securitised a portion of the money swindled by the Hall-Mark Group by taking the Group's land as mortgage.

The BB also told the lender that the irregularities came to light first in a BB investigation and stern actions were taken against other banks where such irregularities were detected.

A total of 23 other banks were involved in 'bill purchase' by Hall-Mark Group from Sonali Bank's Ruposhi Bangla branch.

The BB has carried out a special investigation into the branches of those banks. Irregularities on the part of branch officials of some banks were found and those were referred to the anti-graft body for taking further actions.

In the context of various incidents of scams, the IMF has suggested massive reforms in the state-owned banks.

As part of the reform programme, the lender has advised the BB to conduct a special diagnostic examination of the state banks on their asset quality, liquidity management, internal audit and controls.

The government will make commitment to the IMF that it would carry out the special diagnostic examinations by March.

An official of the finance ministry said such reforms may be one of the major conditions for getting the IMF loan.

The BB itself made allegation to the government that some directors of the state banks were involved in the Hall-Mark scam.

The IMF now wants to know how the new directors are being selected and will closely watch whom the government appoints as directors.

However, the government will appoint the directors and senior management of the banks in line with the BB criteria.

News: The Daily Star/Bangladesh/5th-Dec-12