Staff Reporter :
Poor corporate governance, inadequate risk management, inefficiency of the bank officials, bad lending, a flawed culture and over ambitious drive for growth contributed to the problems in the banking industry, analysts said on Sunday.
They also observed that high interest rates and rising default loans are hindering the smooth growth of the country’s banking sector.
The observations came at a seminar on banking titled ‘Future Vision’ organised by the Association of Bankers held at Hotel Radisson in the city.
Some 600 bankers, from mid to senior levels, took part in the ABB’s first-ever national seminar on the banking system.
Ali Reza Iftekhar, Chairman of ABB presided over the programme. Atiur Rahman, governor of Bangladesh Bank (BB) also attended it, among others.
“Banks are now gripped by bad governance and such a shortcoming is hindering their smooth growth,” said Dr Atiur Rahman while speaking at the seminar.
He added: apart from this, inadequate risk management, asset-liability mismatch
and flaws of banking rules and lack of financial innovation have made them vulnerable.
“Weak corporate governance allows dominant of the bank’s equity holders who later manipulate credit access, credit appraisal and internal control process to their own advantage,” Rahman said.
He added: Time has come to review the corporate governance of banks and they must improve their corporate governance to assure their stability, risk mitigation and growth.
The BB governor observed that banks have also failed to diversify credit concentration and introduce structured products like derivatives and commercial papers to meet the growing funding needs of businesses.
He further said derivative transactions and credit default swaps are largely absent in the local markets because of cautiousness in widening external openness of the economy.
Rahman also criticised the bankers for lending to solvent borrowers only saying that it led the banks insufficient diversification and inappropriate asset-liability mismatches.
“Banks are operating with traditional products and prefer giving loans only. I don’t understand why banks do not come up with other derivative products like lease and syndicated financing,” said SK Sur Chowdhury, deputy governor of BB.
On credit concentration, he said the banking sector’s capital adequacy ratio would be impacted seriously, even if half a dozen of the large borrowers get defaulted.
Khondkar Ibrahim Khaled, a former deputy governor of BB, at the function, suggested the bankers for making a balance between technology and human resources to minimise risks.
He also observed that the lending rate is still higher in Bangladesh compared to those in neighbouring countries. He blamed the sponsers of the banks for high lending rates.
Prof MA Taslim, Chairman, Department of Economics at Dhaka University, expressed his concern over a significant rise in non-performing loans in banks. He said interest rate spread is high in Bangladesh because of inefficiency.
Taslim said BB has shown moderate success in managing its monetary policy, but it has failed to regulate the banking industry properly.
Moazzem Hossain, editor of The Financial Express, called upon top bankers to ensure ‘due diligence’ in a bank’s root level. He also expressed worry over the quality of credit and its concentration.
Jim McCabe, chief executive officer of Standard Chartered Bank, presented a paper on technology and virtual banking in the post-lunch session. Prof SM Ahsan Habib, director of Bangladesh Institute of Bank Management, Muhammad A Rumee Ali, a former deputy governor of BB, and M Kaikobad, Prof of Computer Science and Engineering at BUET, were the panel discussants at the session.
Earlier, Jan Vasko, managing director of Risk Solutions in Singapore, presented a paper on the future of banking in emerging markets.
Poor corporate governance, inadequate risk management, inefficiency of the bank officials, bad lending, a flawed culture and over ambitious drive for growth contributed to the problems in the banking industry, analysts said on Sunday.
They also observed that high interest rates and rising default loans are hindering the smooth growth of the country’s banking sector.
The observations came at a seminar on banking titled ‘Future Vision’ organised by the Association of Bankers held at Hotel Radisson in the city.
Some 600 bankers, from mid to senior levels, took part in the ABB’s first-ever national seminar on the banking system.
Ali Reza Iftekhar, Chairman of ABB presided over the programme. Atiur Rahman, governor of Bangladesh Bank (BB) also attended it, among others.
“Banks are now gripped by bad governance and such a shortcoming is hindering their smooth growth,” said Dr Atiur Rahman while speaking at the seminar.
He added: apart from this, inadequate risk management, asset-liability mismatch
and flaws of banking rules and lack of financial innovation have made them vulnerable.
“Weak corporate governance allows dominant of the bank’s equity holders who later manipulate credit access, credit appraisal and internal control process to their own advantage,” Rahman said.
He added: Time has come to review the corporate governance of banks and they must improve their corporate governance to assure their stability, risk mitigation and growth.
The BB governor observed that banks have also failed to diversify credit concentration and introduce structured products like derivatives and commercial papers to meet the growing funding needs of businesses.
He further said derivative transactions and credit default swaps are largely absent in the local markets because of cautiousness in widening external openness of the economy.
Rahman also criticised the bankers for lending to solvent borrowers only saying that it led the banks insufficient diversification and inappropriate asset-liability mismatches.
“Banks are operating with traditional products and prefer giving loans only. I don’t understand why banks do not come up with other derivative products like lease and syndicated financing,” said SK Sur Chowdhury, deputy governor of BB.
On credit concentration, he said the banking sector’s capital adequacy ratio would be impacted seriously, even if half a dozen of the large borrowers get defaulted.
Khondkar Ibrahim Khaled, a former deputy governor of BB, at the function, suggested the bankers for making a balance between technology and human resources to minimise risks.
He also observed that the lending rate is still higher in Bangladesh compared to those in neighbouring countries. He blamed the sponsers of the banks for high lending rates.
Prof MA Taslim, Chairman, Department of Economics at Dhaka University, expressed his concern over a significant rise in non-performing loans in banks. He said interest rate spread is high in Bangladesh because of inefficiency.
Taslim said BB has shown moderate success in managing its monetary policy, but it has failed to regulate the banking industry properly.
Moazzem Hossain, editor of The Financial Express, called upon top bankers to ensure ‘due diligence’ in a bank’s root level. He also expressed worry over the quality of credit and its concentration.
Jim McCabe, chief executive officer of Standard Chartered Bank, presented a paper on technology and virtual banking in the post-lunch session. Prof SM Ahsan Habib, director of Bangladesh Institute of Bank Management, Muhammad A Rumee Ali, a former deputy governor of BB, and M Kaikobad, Prof of Computer Science and Engineering at BUET, were the panel discussants at the session.
Earlier, Jan Vasko, managing director of Risk Solutions in Singapore, presented a paper on the future of banking in emerging markets.
