Two major financial institutions of the country - Investment Corporation of Bangladesh (ICB) and Bangladesh House Building Finance Corporation (BHBFC) - have been doing their banking and financial activities without any licence of the central bank, said a report of Bangladesh Bank (BB).

The BB has urged the government to bring the activities of the two state-owned financial organisations under the purview of the central bank to establish financial discipline.

"These two financial institutions (ICB and BHBFC) have virtually no regulator," said BB in a confidential report to the Ministry of Finance (MoF).

The financial institutions operating in the country are very much under the close monitoring of BB, which is not applicable to these two state-owned financial institutions, the report added.

The BB said both the institutions, though involved in the financing business for long in the country, are not licensed institutions.

Sources in the financial institutions said the ICB has been involved both in banking and leasing business without having licences from BB for even a single purpose.

The ICB was established in 1976 under the ICB Ordinance, 1976. As per clause 3(3) of ICB Ordinance, the organisation is a banking company. However, ICB has been doing banking business without any banking licence, the sources alleged.

"The Corporation shall be deemed to be a banking company within the meaning of the Bank Companies Act, 1991 (Act XIV of 1991)," reads clause 3(3) of ICB Ordinance, 1976.

"Although the ICB Ordinance stipulates that the Corporation is a banking company, in reality ICB is not a banking company or a scheduled bank," BB said in its report.

Currently, the ICB takes term deposit from clients. Besides doing banking business, the Corporation is involved in lease financing, consumer credit, lien, equity support and share related business.

The BHBFC, established under BHBFC Order, 1973 has long been involved in financing activities permitted under Financial Institution Act, 1973.

"The BHBFC did not take any licence from BB under Financial Institution Act, 1973," BB said in its report.

"Steps are urgent to bring both ICB and BHBFC under the Financial Institution Act, 1973," it added.

Presently, BHBFC provides house building loan at administered rates of interest to meet the demand of housing problem in the country.

Neither BHBFC nor ICB sends any financial reports to BB for monitoring and supervision.

Asked, top bosses of ICB and BHBFC, who declined to be named, said they send financial reports and audit reports to the MoF.

However, the MoF never sends its teams to evaluate or supervise the activities of the two state-owned financial institutions paving way for irregularities, the sources alleged.

The Credit Information Bureau (CIB) of BB seldom scrutinises the loan proposals of BHBFC as the Corporation is not a licensed financial institution, a top BB official said.

"Sometimes, BHBFC sends its loan proposals to us, which we care little as the institution is not a legal entity to operate financing business," the official added.

A general manager of ICB, when asked, said they have no problem if they are brought under the jurisdiction of BB.

Financial Express/Bangladesh/ 12th March 2012

Nobel Peace Laureate Professor Muhammad Yunus addressed a roundtable meeting of European Investment Bank (EIB) to brief the top executives of the EIB on social business, in Luxembourg recently, according to a press release. The President of the European Investment Bank, Werner Hoyer had organised the meeting at his office on March 5, 2012.

Professor Muhammad Yunus explained the concept of social business to the group and proposed various actions by the bank to facilitate social businesses in that region.

President Hoyer showed his deep interest in playing a pioneering role as facilitator of Social Business in Europe.

He also expressed his interest in creating a fund to support social businesses.

Other than the president, several senior officials of EIB group took part in the discussion, including Vice President Plutarchos Sakellaris, CEO of the European Investment Fund, Richard Pelly, Director General Operations outside European Union, Tamsyn Barton, Rémy Jacob, Dean of EIB Institute.

The European Investment Bank (EIB) is the European Union's financing institution. Its shareholders are the 27 Member States of the Union, which have jointly subscribed its capital.

The EIB's Board of Governors is composed of the Finance Ministers of these States.

The EIB's role is to provide long-term finance in support of investment projects. The EIB works closely with the other EU institutions, especially the European Parliament, the European Council and the European ommission. The European Investment Fund is a subsidiary of the EIB.

The Independent/Bangladesh/ 12th March 2012

AKM Shamsuddin, Deputy Managing Director of Premier Bank, seen at the inauguration of a workshop in the city yesterday. Premier Bank Training Institute (PBTI) organised a day-long workshop on “Islamic banking, operational procedures” in the city yesterday.

AKM Shamsuddin, Deputy Managing Director of Premier Bank inaugurated the workshop as chief guest, said a press release.

Emphasising on the importance of Islamic banking, he hoped that Premier Bank will play an important role to provide Islamic banking service to the customers. He urged the officials to discharge their duties with utmost sincerity.

The Daily Sun/Bangladesh/ 12th March 2012

Four state-owned banks (SoBs)- Sonali, Agrani, Rupali and Krishi Bank- currently suffer 45 percent of total classified loans in industrial sector of the country, showed Bangladesh Bank data.

The total classified loan in the sector stood at Tk 71.54 billion early in the current fiscal, which is 5.26 percent of total outstanding loan.

Bangladesh Bank (BB) data also showed that the privately-owned banks have 30.80 percent of classified loan while the foreign banks 2.38 percent and private specialised banks 11.95 percent and other financial institutes have 9.29 percent.

Former Finance Adviser to a caretaker government Dr. AB Mirza Azizul Islam told daily sun that classified loan and its slow recovery is nothing new for the state-owned banks.

He said state-owned banks don’t conduct any adequate study and scrutiny before providing loans, at one hand, and distribute a significant amount of loans under political consideration, on the other hand, increasing the likeliness of the loans to be classified.

“The political influence also makes the loan recovery difficult for the state-owned banks,” said Dr Mirza Aziz.

He said: “Although Bangladesh Bank initiatives such as enacting laws helped to improve the situation slightly, the current statistics are bleak again.”

The liquidity crisis slowed down the credit flow in the commercial banks during the second half of the last year, said the senior officials of the commercial banks.

According to BB data a total of Tk. 541.62 billion was distributed as industrial credit during the last six months of 2011. Of the amount, the operating capital was Tk 368.57 billion while the term loan amounted to 173.05 billion.

The data said total industrial credit during the same period of 2010 stood at Tk 525.36 billion.

As the figures showed, the total recovery of industrial credit during the last six months of 2011 was Tk 470.28 billion. The running capital amounted to Tk 318.57 billion and the term loan reached Tk 151.71 billion during the period.

The BB figures also said the classified loan in industrial sector during the second half of 2010 stood at Tk.73.82 billion which is now Tk 71.54 billion, marking a decline of 3.9 percent.

According to the central bank’s officials, there were various steps taken to reduce the amount of classified loans and the commercial banks complied with the BB directives to implement the steps, thus being able to reduce the amount.

During the second half of 2011, the amount of expired loan stood at Tk 127.60 billion which is 9.39 percent of total credit in the industrial sector.

Of the amount, the running capital was Tk 62.78 billion and the term loan was Tk 64.82 billion.

The classified loan during the period also marked a rise by 13.43 per cent from the amount of the same period a year ago. The classified loan Tk 112.49 billion during the last six months of 2010.

The Daily Sun/Bangladesh/ 12th March 2012

                                                                             M Shahjahan Bhuiyan

When the banking industry is grappling with high cost of funds and going with higher lending rates, a top banker said the soaring costs of borrowing will threaten the entrepreneurs and the overall economy in the days to come.

“Doing business is becoming costlier as the borrowing cost is getting dangerous. This will have a significant impact on the economy,” said M Shahjahan Bhuiyan, managing director of United Commercial Bank, popularly known as UCB.

He was sharing his thoughts on the banking industry in Bangladesh and the regulator's role in helping the sector grow in an interview with The Daily Star at the Bank's headquarters in Gulshan recently.

“To stop making local products uncompetitive, the regulator should come up with some control over the Banks on the rising borrowing costs,” said Bhuiyan who has been in the banking industry for more than 40 years.

He said some industries have already been affected and are being shut down. The UCB boss also talked about the recent exchange rate volatility where he smells manipulation.

Leading business bodies and entrepreneurs have already raised the issue and expressed their concern. They said after the central bank withdrew the cap on lending rates in the last quarter of 2011 commercial banks started to increase the lending interest rates up to 18 percent. Even the Banks have increased interest rates for the loans taken a year or more ago.

Bhuiyan's stand may puzzle many bankers, but he argued on strong logical ground.
Why have some banks been facing a liquidity shortage? Why does their cash flow get squeezed? Why are they borrowing from the overnight call money market at higher rates?

He said: “It was because of their (Banks) imprudent activities. They invested heavily on speculative market bypassing core banking investments.”

“Some banks mismatched their asset-liability management.”
Borrowers took their industrial or working capital loans straight to the stockmarket and banks failed to supervise those misdeeds, which he said had an impact on some banks' cash flow.

He called upon the central bank to carry out an investigation into the banks that are taking deposits at higher rates.
Bhuiyan is a luminary in the banking business. After graduating from Dhaka University he joined the then State Bank of Pakistan in 1970. He worked in Pubali Bank for 16 years before switching to City Bank and UCB in different senior positions. He then served Prime Bank for nine years, of which five and a half years as managing director.

He joined the trouble-torn UCB in 2008 as its managing director and magically turned the Bank into a very successful one.

Deposits, loans and advances have gone up nearly four times between 2008 and 2011. Non-performing loan which is an important indicator in assessing a Bank's soundness has come down to less than 2 percent in 2011 from 4.62 percent in 2008.

Bhuiyan recently won the country's first-ever best banker award for his outstanding contribution to steering the troubled-bank into a profitable one.

Now Bhuiyan dreams even bigger -- to turn the Bank into a model financial institution.
What magic he has played?

“Though late, the board has understood that the Bank is missing out huge business potential,” said Bhuiyan.

“They (directors) are young, professional businessmen and understand the economy. All they needed a confident and efficient management,” he said. “This mixture has worked and the board has seen that it is yielding results for the Bank.”

He said, a lot of customers who left the Bank for its poor services, started coming back. Now customers are marketing for the Bank.

All he had to do was an overhaul of the employees' mindset and policies and setting up the goal. He tried to bring a dynamic and enthusiastic environment in the working process.

“UCB as a first generation private bank earlier did not recruit employees on the basis of merit. So, they failed to net and deliver customers,” he said.

To him, training the employees is a continuous process. “Not only training, they must be given incentives to be inspired to deliver their best,” he said, citing an example of welfare fund established for the employees. He also introduced performance-based incentives and promotions for the employees.

He holds high hopes about Bangladesh. According to him, there is no dearth of ideas, businesses and manpower in the country. Banks have a role to advise and guide new entrepreneurs as they did in flourishing apparel industries in the country, he said.

“Man will get old and die, but not an organisation. A good institution has to adjust with the changes to deliver efficiently.”

The Daily Star/Bangladesh/ 11th March 2012