The Managing Director and Chief Executive Officer of Trust Bank Limited—Shah A. Sarwar— fells that the latest call-money market volatility was a result of failed management by some financial institutions hich overlooked the importance of keeping balance between profit and liability. “If a financial institution goes for excessive profits, it might compromise its stance on liquidity, making itself vulnerable in the face of crisis,” he said.
  The top official of the Trust Bank Ltd said this while talking to The Independent in an interview, elaborating the latest money market volatility that surged as high as 180 per cent.
Financial Institution is a long term institution, have to build up its inner capacity in a way that it can stand tall to face both immediate and long terms issues.
According to him, there has been a significant availability of liquid money as a result of the country’s present investment scenario. Other than investment in the agriculture sectors, there has been a pause of investment in other sectors, he explained.
Misguided by this concentration of liquidity in the market, some financial institutions engaged themselves in investing into ‘non-cash generating sectors’ instead of managing its liquidity in a more wise modes, he said.
Mentioning banks investment in sectors like secondary equity and speculative real-estate markets, Mr Sarwar signalled caution in order to escape the effect of similar market volatility in coming days.
When a financial institution fails to maintain its control to invest into these sectors where commensurate cash return is unlikely, then the institution become vulnerable to such money market turmoil, he said.
Besides, when a bank invest huge amount of its capital/liquidity in expanding and renovating its premises, can find itself into liquidity shortage, he added.
“One or all these aspects could have played role in creating such shortage and likely be the reason behind the latest volatility,” he elaborated.
Explaining the stable position of the Trust Bank Ltd at the face of the recent money market instability, its MD/CEO attributed his bank’s management planning, followed by forward looking investment policy and understanding of the market movement.
“We have not managed the situation by fluke,” Mr Sarwar said, pointing out that it was an outcome of the bank’s wise policy.
Apprehending the current market scenario, he said, our bank management has undertaken several steps in last couple of months ‘with caution’.
“We have consciously come out of secondary stock market in keeping with our safety measures,” he said adding that they have ensured balance in investment in all sectors.
He said that it was essential that the CEO demonstrated leadership to strike a right balance between profitability and liquidity.
The Trust Bank chief maintained such a balance that helped the bank sail through smoothly when the market went into the extreme volatile phase recently, Mr Sarwar said.
It is also important to finance through a segment and sectoral balance to avoid structural cash flow issue and Trust Bank could do so successfully. When some private commercial banks put money in non-cash generating risky areas, the Trust Bank Ltd remained careful not to indulge.
“In line with the Bangladesh Bank’s policy, we were careful about investing in the over-heated stock market and also in other unproductive areas, and that’s why, we remained safe,” Mr Sarwar added.
Replying to a question, he said that his bank adjusted the stock market investment in last June as the stock market was going up to an unending limit.

Source: The Independent