The Bank and Financial Institutions Division (BFID) has sought more than Tk 10,000 crore for the next two fiscal years mainly to meet the capital shortfall of the two scam-hit state banks.

It also wants to inject fresh capital into other banks and financial institutions.

Last week, the BFID sent a comprehensive proposal to the Finance Division saying the institutions have been facing a capital shortfall of Tk 14,054 crore.

Subsequently, it sought Tk 5,000 crore for fiscal 2016-17 and fiscal 2017-18 each.

Some Tk 5,000 crore has already been earmarked in the current year's budget, of which Tk 1,200 crore has already been disbursed to BASIC Bank. In the last two fiscal years, a total of Tk 10,000 crore was set aside for the purpose, but in the end, about Tk 6,400 crore was given to banks.

BFID Secretary M Aslam Alam said a comprehensive plan was sent to the Finance Division this time to avoid having to ask for funds over and over again.

As per Basel II, Sonali Bank has Tk 2,935 crore of capital shortfall and BASIC Tk 3,051 crore, according to BFID statistics. Krishi Bank has a shortfall of Tk 6,676 crore, which is the highest.

Due to the scams at Sonali and BASIC, a big hole has been created, Alam said. Although the two banks are now running well, the financial hole has to be plugged still.

Sonali is the largest bank in the country, and if its balance sheet remains bad the international community may lose trust in Bangladesh's banking sector altogether, he said.

The capital shortfall at Krishi Bank is not only due to corruption and inefficiency.

The government waived a portion of the bank's loans that turned into defaults since independence, and the trend continued until the mid-1990s, Alam said. This has created a long-term capital shortfall, so the government has decided to inject funds.

Alam said the government has shares in some private banks, including the Grameen Bank, so it needs to top up their capital as well.

As per the new insurance law, the government has to provide capital to Sadharan Bima Corporation and Jiban Bima Corporation as well.

On the other hand, the government has set up some new banks like Palli Sanchay Bank, where it also has to provide capital. Zahid Hossain, lead economist at the World Bank Dhaka office, said the BFID's fund demands would be a huge burden on the budget. It is understandable that large banks like Sonali are too big to be allowed to fail. They need recapitalisation in order to continue their regular operations. 

However, it is important to harden their budget constraints so that they do a complete a clean-up of all bad loans by a specified date, he said.

“Unconditional recapitalisation provides no incentive to do some deep surgery to repair their damaged balance sheets.”

He said the BFID's annual performance agreement with the banks should have specific indicators on the solvency of each of the institutions seeking recapitalisation. 

Disbursement from the budgetary provisions for recapitalisation should be linked to achieving the specified improvements in these indicators. 

Over the longer term, rising stress in the state-owned banks will require more radical reforms in the structure of governance in them. The fundamental problem with the state banks is that they are run as state-owned enterprises: the government has improper influences on their operations, according to Hussain.

Also, many private industrial companies have been hit by delays in making their investment projects operational due to unavailability of basic utility connections such as gas, water and electricity, leaving them unable to repay their loans to state banks.

These problems have been around for a long time and are deeply rooted, he said.

Without a thorough reform of the SOEs and the way that banks are run as SOEs, the problems with the banking system will never be really solved, even after the banks are fully or partially relieved of current non-performing loans.

In response, Alam said the BFID signed performance contracts last year for the first time with banks.

Since it was the first time, the targets were softer. But this year, they will be made tougher, he said.

Furthermore, initiatives have been taken to bring reforms to state banks, he said, adding that efficient and skilled persons are being appointed in the banks' boards.

Muhammed Ali; Managing Director of United Commercial Bank Limited and Mohammed Jahangir Alam; Chairman, GPH Group & Managing Director, GPH Ispat Ltd sign an agreement to act as lead arranger of USD 154 million Foreign for setting up a new integrated steel

Economic Reporter :United Commercial Bank Limited (UCBL) recently signed an agreement with GPH Ispat Ltd. to act as Lead Arranger & Security Agent to raise USD 154 million (Foreign currency 140 million & local currency 14 million) equivalent to total BDT1232.00 crore for setting up a new integrated steel mill by GPH Ispat Ltd.Total cost of the project is USD 220.06 Million equivalent to BDT 1760.50 crore where UCB as Lead Arranger raise USD 154 million equivalent to total BDT1232.00 crore. Muhammed Ali; Managing Director of United Commercial Bank Limited and Mohammed Jahangir Alam; Chairman, GPH Group & Managing Director, GPH Ispat Ltd. signed the agreement on behalf of respective organizations.Among others Additional Managing Directors of UCB namely M Shahidul Islam, Mirza Mahmud Rafiqur Rahman and AE Abdul Muhaimen were present at the event.Moreover, Chairman of GPH Ispat Ltd Md Alamgir Kabir and Additional Managing Director of GPH Ispat Ltd Mohammed Almas Shimul along with senior officials of both the organizations were present at the event.

Economic Reporter :Under the Smile-Brighter program, Dutch-Bangla Bank has organized plastic surgery operation campaign at Dhaka Trauma Center and Specialized Hospital, Shyamoli, Dhaka on Sunday. It is free of cost for the poor cleft-lipped boys and girls to bring back the endearing smile on their faces. A plastic surgery team headed by eminent plastic surgeon Dr. Shareef Hasan successfully operated a total of 20 boys and girls. KS Tabrez, Managing Director of Dutch-Bangla Bank visited the operation camp and inquired about the cleft-lipped boys and girls at the hospital. Dr. Mohammad Jahangir Alam, Managing Director of the hospital was also present.It is mentionable that, DBBL has been continuing this cleft-lip surgery program for the poor boys and girls at free of cost across the country round the year under the banner "Smile Brighter" since 2003.

HSBC Holdings could move around 1,000 employees from London to Paris in the event that Britain votes to leave the European Union, the bank's Chief Executive Stuart Gulliver was quoted saying by Sky News on Monday.

The staff would be moved from HSBC's trading, corporate banking and investment banking units, Gulliver was quoted saying, with the total number of jobs moving dependent on the terms of the so-called Brexit.

A source with knowledge of the matter confirmed the comments.

The plan to possibly move jobs away from London in the event of a British exit from the EU comes the day after Europe's biggest lender decided to keep its headquarters in London after a 10-month review.

Gulliver's comments represent the most direct statement yet by a chief executive of a major UK-based company on the possible impact on jobs if the British public vote to leave the EU in a referendum.

Most major British firms are seriously considering the risk of Britain leaving the EU and many are making contingency plans, according to the head of the Confederation of British Industry lobby group.