Bangladesh Bank (BB) instructed the scheduled banks to strictly maintain cash reserve requirement (CRR) and statutory liquidity ratio (SLR) which will be effective from February 1.
Currently the conventional banks are maintaining the SLR at 19 per cent, including the CRR, and the Shariah-based Islamic banks maintain 11.50 per cent SLR, also including the CRR. But from now on the banks have to maintain the SLR and CRR seperately. As per the new circular, the required CRR will be 6.0 per cent on bi-weekly average basis of the average total demand and time liabilities (ATDTL) with a provision of minimum 5.5 per cent on daily basis of the same ATDTL. The required SLR will be 13 percent daily for conventional banks and 5.5 percent daily for Islamic Shariah-based banks and Islamic Shariah-based banking of conventional banks of their average total demand and time liabilities.
Department of Off-Site Supervision (DOS) of BB issued a circular in this connection on Sunday asking the chief executives of all scheduled banks to comply with the new procedure of the CRR and the SLR from the stipulated timeframe.
At present, banks are allowed to maintain cash reserve with local currency (Bangladesh Taka) only.

News:The Independent/21-Dec-2013

Bangladesh Bank has imposed a restriction on spending by the commercial banks on purchasing motor vehicles, apparently to prevent them from the recent buying spree of expensive luxurious cars.

All the scheduled banks have been asked not to purchase any more motor car (Sedan) for their own at a cost more than Tk50 lakh and a SUV (sport utility vehicle) not above Tk1 crore, even if it is with the banks’ own funds.

“Bank companies should show their cost affordable tendency to maintain confidence of the depositors and equity providers on management,’’ said a circular issued yesterday. The directives take immediate effect.

Recently, Chairmen, CEOs and high officials of some banks seemed to have the tendency to purchase luxurious motor cars and high expenses for branch decoration. The central bank issued the directive to discourage the high expenses. The commercial banks often come under criticism recently due to their desperate spending particularly to provide the directors with luxury cars, which put pressure on the banks’ profitability.

The circular said the bank companies are allowed to purchase vehicles similar to those of security vehicles for carrying remittance. However, they are not allowed to collect motor car by taking lease financing facility from other banks or financial institutions, according to the circular.

The growth of increasing vehicles has to be consistent with the increase of manpower as well as the branch of the company. Annual expenditure growth in this sector should be limited to 10%. The vehicles for the board chairman and chief executive officers should be replaced after using vehicles for at least five years.

The information on using the motor vehicles and their operating cost should be placed before the board meeting in every six months and the annual general meeting. Banks are not allowed to use space above 5,000 square feet for city branches and 2,000 square feet for rural branches.

The expenditure on IT equipment will not exceed Tk1,500 for occupying one square feet of space for new branches and for existing branch transfer, it will not exceed Tk1,000 per square feet, according to the circular.

The banks should consider quality and durability of the furnitures and fixtures to be procured based on the necessity instead of their luxuriousness.

News:Dhaka Tribune/17-Jan-2014

Bangladesh Bank has advised the bank companies which have accounts of US taxpayers to report to the country’s internal revenue service (IRS).

A circular issued yesterday made the advice to do it as per Foreign Account Tax Compliance Act (FATCA) of the United States.

As Bangladesh government has not yet decided to execute an intergovernmental agreement with the US, the obligation can alternatively be discharged at individual bank level by registering and signing ‘Participation Agreements’ with the IRS, it said.

National Board of Revenue also consented on registering with the IRS if a bank has US taxpayer accounts in its books.

FATCA enacted in 2010 requires a foreign financial institution (FFI) to report to the IRS information about certain accounts held by US taxpayers or by foreign entities in which US taxpayers hold a substantial ownership interest.

According to the definition of FFI, all banks as defined in the Bank Company Act, 1991 have come within the provisions of FATCA.

Banks said FATCA may have implications for their customers and operations should register themselves with the IRS and put in place appropriate processes and controls to ensure compliance with the law.

The concerned banks are advised to visit the IRS’s website, www.irs.gov/fatca-registration, for necessary guidance in this regard.

Banks should communicate with the existing customers well in advance of executing “Participation Agreement” with the IRS enabling the accountholders to comply with reasonable requests for information or to provide acceptable documentation to meet the FATCA obligations, according to the circular.

Bangladesh Bank said because the agreement requires disclosures which would normally be breaches of the banker’s general duty of confidentiality under prevalent Bangladeshi

laws including the Bankers’ Books Evidence Act 1891, banks are to obtain written consents from their customers before reporting the requested information to IRS.

News:Dhaka Tribune/17-Jan-2014

The central bank yesterday asked banks to cut down their spending on luxury vehicles and at the same time almost doubled the allowance for these purchases.
Bangladesh Bank's latest notice, which came with the intent to rein in banks' expenses, said a maximum of Tk 50 lakh can now be spent to acquire a car for high officials, including the chairman, and Tk 1 crore for a sport utility vehicle (SUV).
The purchase ceilings, as per the notice issued in July 2012, were Tk 35 lakh and Tk 50 lakh respectively.
“The limit has been increased to make it reasonable. The previous limit was not enough,” SK Sur Chowdhury, deputy governor of Bangladesh Bank, told The Daily Star.
The latest notice also forbade banks from buying motor vehicles with lease financing from other banks or non-bank financial institutions, as some took advantage of the facility and bought expensive cars with the lease money, Chowdhury said.

It also stipulated that cars used by the chairman and chief executive officer of a bank cannot be replaced before five years, and that the expansion of the banks' transport fleet must be proportional to the expansion of branches and recruitment of new employees.
The notice said the BB has observed that some banks have been spending huge sums on decoration of branches in recent months.
Subsequently, the central bank has restricted the banks' spending on new branches to Tk 1,500 per square foot and Tk 1,000 per sq ft for relocation of the existing branches excluding IT infrastructure costs.
It also said a bank shall not use more than 5,000 sq ft of space for establishing an urban branch and 2,000 sq ft for a rural branch.

News:Daily Star/17-Jan-2014

All branches of the scheduled banks will remain open throughout the country this Friday for what authorities said public interest. Bangladesh Bank on Wednesday issued a notification signed by AFM Asaduzzaman, general

manager at governor secretariat of the central bank, in this regard. Earlier in the day, he told the Dhaka Tribune that the move would be finalised at a meeting on Wednesday. The move to keep banks open on Friday,

a holiday, comes in view of poor business environment standards amidst agitation programmes. Most of November and December were wasted in agitation programmes like blockades and hartals of the BNP-led 18-party alliance.

Businessmen said such situation ahead of the January 5 elections were proving a big challenge for trade and business of Bangladesh. Recently, the business community were compelled to come down to the streets demanding an end to the current political impasse.