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The lack of capable leadership within banks is the main reason behind the increase in the volume of nonperforming loans (NPLs) in the country, a top official of the central bank has said.
To tackle the situation, the official said, it is necessary to have ethical leadership at the top of the banking institutions.
"The current problem in NPL management, liquidity crisis, loan scam, fraud and forgery are arising because of the absence of efficient and effective leaders in banks," said S. M. Moniruzzaman, deputy governor of Bangladesh Bank.
"A good leader in banks can transform a bank from non-profitable into profitable. Similarly, a dishonest leader can transform a bank from profitable into a non-profitable one," the deputy governor said.
"Ethical leaders in banks are a must for better performance and business sustainability," he added.
He made the remarks while speaking at a seminar on leadership in the banking sector. Bangladesh Institute of Bank Management organised the event in the city on Monday.
"Effective credit risk management and sound corporate governance practices should be the priority in the leadership approaches of banks," said Dr. Shah Md. Ahsan Habib, professor and director of BIBM.
"Irrational profit targets may offer incentives to compromise with the processes of borrower selection and credit disbursement," Habib cautioned. "This may also lead to the worsening of non-performing loans." He said, while presenting the keynote paper at the event.
Dr. Habib, however, noted that "slowing down" is not the solution.
"Rather, it is about identifying reasonable profit targets for attainable growth and justified incentive packages for the employees," he said.
Experts at the seminar also called for developing the soft skills of all key stakeholders including board, top management and bank employees.
Soft skill programs are specially needed to improve emotional intelligence amongst bankers for better group outcome and leadership development, they added.
Reflecting on a perception survey carried out on hundreds of branch managers and mid-level bank executives, the BIBM experts said that the survey participants, on average, rated the leadership roles of the board and top management as 'good' and average.
Nevertheless, he said the industry is becoming exposed to newer challenges, financial crimes and competitions.
"Effective leadership, sound governance and soft tools like emotional intelligence are tools for tomorrow's banks to survive," he added.
"Too much aggressiveness is harmful for banking. Aggression should be accompanied with caution", said M Kamal Hossain, Managing Director of Southeast Bank Limited.
"Each and every loan proposal should be assessed and monitored cautiously," Mr. Kamal said, adding "one of the main reasons behind this rising amount of NPL is because the loan proposals were not assessed properly".
"Leaders also need to cope with the ever changing global and local scenario," he added.
"The CEOs and Managing Directors of the banks need to learn how to say 'no' even in the face of external or internal pressure," said Md. Shafiul Azam, managing director of Modhumoti Bank Limited.
"Attaining the soft skills is the most critical issue for today's banking. And to attain the soft skills, there is no alternative to training," said Helal Ahmed Chowdhury, Supernumerary Professor of BIBM.
"Leaders of the banks need honesty, integrity, knowledge, confidence, commitment and passion," said Dr. Barkat-e-Khuda, Professor of BIBM.
"They also need to be good communicators and need to know how to inspire others", he added.
Director General of BIBM Dr. Toufic Ahmad Choudhury also spoke on the occasion.