Bangladesh Bank (BB) has reissued its directives to the scheduled banks asking them not to provide interest or profit to the fixed or term depositors above the fixed and announced rates.

The Bank Rules and Policy Department (BRPD) of BB reissued the circular on Wednesday.

The circular mentioned that the central bank has observed that some of the banks were providing higher rates for the fixed deposit for attracting more deposits.

Experts opined that the ongoing liquidity crisis in the banking sector has been leading the commercial banks to collect deposit even paying higher rate of profit.

During the need, the banks often come to forget the guidelines or directives issued by the central bank, which is not a good practice for the banks, they said.

Eminent Economist and former Deputy Governor of Bangladesh Bank Khondoker Ibrahim Khaled told daily sun that the central bank has no right to fix up the interest rate sine a free-economy exists here.

The banks themselves are supposed to fix-up their own interest rates and there should be a little chance that the banks violate their self imposed rates, he added.

Nonetheless, the banks are violating their own rates and Bangladesh Bank has all the right to resist them from such practices, Ibrahim Khaled said.

Earlier, the central bank directed all the scheduled banks not to impose interest upon the fixed deposit more than the BB announced rates.

Macro Economist Prof. Dr. Muhammad Mahbub Ali said the circular from BB was quite justified since the banks had been violating directives.

The BB has also advised the scheduled banks to provide a weekly list of fixed deposit accounts of Tk 10 million and above, renewed or issued by the respective banks.

Information on the fixed deposits issued or renewed till the last day of a week will have to be sent to BB within the next three days, signed by the Managing Director or Chief Executive Officer (CEO) of respective banks, the circular said.

The Daily Sun/Bangladesh/ 1st March 2012

Bangladesh Bank has recently directed the Securities and Exchange Commission (SEC) for boosting secondary bond market to meet the existing liquidity crisis of the banking sector.

A high official of BB on Wednesday said the cash flow will increase through more trading of bonds which could help overcome the fund crisis, also increasing share trading in bourses.

Some bankers said they are facing strong liquidity crisis as a large amount of funds, supplied to the government, were blocked.

BB statistics showed that government borrowed Tk 870 billion from different commercial banks up to February this fiscal.

“We are giving loan to the government for the periods of 5, 10, 15 and 20 years term, but government is giving us a so called bond just like a paper,” officials of the commercial banks said.

“On the other hand, government had formed secondary bond market for trading of the circulated bonds against loan. Now we could not exchanges the bonds as secondary market falls,” they added.

As per the BB’s statistics, bonds worth Tk 710 billion are lying in the commercial banks of the country.

But it was mandatory for the banks to deposit Tk 500 billion to the Central Bank, against their deposits. The highest interest rate of government Treasury bond is 9.75 percent. Most in most cases, bankers alleged, they are getting only 6 to 7 percent.

But Banks are collecting deposits at 14 percent interest rate to overcome the fund crisis, while taking short term loans from the call money market at an average interest rate of 20 percent, bankers said.

The central bank has directed the insurers to invest 30 percent of their funds to the bonds. At the same time, the central bank also suggested all financial institutions to invest a portion of their mutual funds to the bond market.

With increased investments from the insurers and FIs in line with the BB’s latest direction, the secondary bond market might see a boost, BB officials said.

The Daily Sun/Bangladesh/ 1st March 2012

Standard Chartered Group Hong Kong Executive Officer Benjamin Hung (L) addresses a press conference as Standard Chartered Group Executive Director Jaspal Bindra listens (R) in Hong Kong yesterday.

Standard Chartered bank said Wednesday it saw a record net profit of 3.53 billion euros ($4.75 billion) in 2011, boosted by strong performance in developing economies.

The London-based but Asia-focused bank said the net profit figure was up 12 percent from the year before, thanks to operating income of $17.64 billion.

In a notification to the Hong Kong stock exchange, it said annual profit before tax came to $6.78 billion, up 11 percent year on year. Consumer banking revenue jumped 12 percent while wholesale banking revenue grew nine percent. Bad debt charges were flat.

It was the ninth successive year of record income and profit as continued strong performances in developing markets offset woes in under-pressure Western economies that are struggling to recover from the global financial crisis.

"Taken as a whole, emerging Asia should continue to grow at mid- to high single-digit rates -- slower than before the crisis, but still much faster than the West," Chief Executive Peter Sands said in a statement.

"This sharp polarisation in economic performance and prospects is one reason different banks are in such different positions."

He predicted double-digit income growth in the medium term but warned that an "ever more complex set of regulatory requirements" linked to capital adequacy requirements could act as a "drag" on earnings and costs.

"All of us face the challenge of the ongoing avalanche of regulation. None of us can be complacent about the continuing fragility of the system," Sands said.

Standard Chartered was "supportive" of the Basel III reforms intended to buttress the global financial system against a repeat of the 2007-2008 collapse.

"Yet we worry about the increasing profusion of national or regional variations," Sands said.

"This is creating incredible complexity, huge costs, and a multitude of unintended consequences, not least the fragmentation of the global financial system and the emergence of new forms of financial protectionism."

Greater China -- including Hong Kong, Taiwan and mainland China -- delivered profits of $2.1 billion, up 46 percent, the bank said.

The Greater China market represented 25 percent of the group's total income and 31 percent of total profits, despite losses of around $100 million in mainland consumer banking.

Another "star performer" was Singapore, which enjoyed income growth of 26 percent.

But other markets in Asia were not so kind, notably India and South Korea.

The bank's South Korean operation was hit last year by a 10-week strike -- the longest in the country's banking history -- over attempts to adopt a performance-based pay system. In December management introduced an early retirement programme for South Korean staff.

"This had a big impact on Korea's profits in 2011, but it was undoubtedly the right thing to do," Sands said.

"Like Korea, India had a tough 2011, but I am confident both will resume their growth path in 2012," he added.

As developed economies continue to deal with the aftermath of the global financial crisis, Sands said the world was "witnessing a profound shift in economic power and dynamism" in favour of developing countries.

"The clouds over the West should not obscure the sheer scale of wealth creation and social progress in the developing world," he said.

The profit result matched the average forecast of $4.75 billion from eight analysts polled by Dow Jones Newswires.

In afternoon trade shares in Standard Chartered were up 0.75 percent at HK$200.80.

The Daily Star/Bangladesh/ 1st March 2012

Bangladesh Bank yesterday asked all banks not to offer any interest rate on deposits beyond the declared rate.

Some banks offered depositors interest rates beyond the declared ones, the central bank said in a letter to banks. The BB asked the banks to forward the interest rate on deposits every week in order for BB to monitor.

The interest rate on deposit and lending can be changed only once a month, according to the letter.

The Daily Star/Bangladesh/ 1st March 2012

Bangladesh Petroleum Corporation (BPC) owes state-owned banks more than Tk 17,000 crore as of January 12, making the banks reluctant to open further letters of credit meant for fuel import.

The banks have already conveyed their stance on LC opening at a high level meeting with Finance Minister AMA Muhith on Tuesday night.

Bangladesh Bank Governor Atiur Rahman, officials of the four banks, and other senior government officials were present at the meeting.

Officials of the banks said the BPC's overdues to the banks have gradually been rising in the recent times. As a result, the banks are facing a liquidity dearth.

On December 31, 2010, the state-run BPC owed the banks Tk 8,780 crore, and the amount more than doubled in just one year.

A finance ministry official who attended the meeting said they have requested the finance ministry to arrange the BPC's overdues in cash, not in bond.

Earlier the BPC made its payment in bond but it was not helpful in solving their liquidity crisis.

However, the finance minister told the banks that the Finance Division is working on their accounts and will take a step soon for repayment.

An official of the energy ministry said the BPC's losses were three times higher last fiscal year than the previous year.

The amount of losses stood at Tk 7,208 crore last fiscal year due to a big difference between BPC's purchase price of fuel and selling price in the local market, he added.

The official also said fuel prices were hiked several times in the current fiscal year, but the amount of losses did not decrease due to a huge depreciation of the taka against the dollar.

To offset the losses, fuel prices need to be increased further, he said.

The meeting also discussed the issue of taking credit for the BPC from a foreign lender, Islamic Trade Finance Corporation (ITFC).

The ITFC has decided to raise the credit limit for the BPC to $2.5 billion from this year.

Of the amount, $500 million will be taken for this year through special arrangement, and the amount will have to be repaid in nine months.

In line with the new conditions of the ITFC, it will now open LCs worth $500 million.

Usually the state banks open the LCs under the ITFC credit limit.

At the meeting, the state banks were also told that they will have to repay $500 million credit. However, the banks set three conditions for paying the loan.

The conditions are -- the BPC will have to pay the amount in local currency; the BPC will inform the banks about the repayment date at least 15 days ahead of the payment; and if the banks have a dearth of foreign currency at that time, the central bank will supply the foreign exchange.

The Daily Star/Bangladesh/ 1st March 2012