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Three more commercial banks, which were plagued by irregularities and scams during the Awami League government's tenure, are set to come under an asset quality review (AQR) by an international audit firm this week.
The banks that will face AQR, generally known as forensic audit, are AB Bank, IFIC Bank and National Bank, officials said.
The decision was taken at a review meeting with chairmen and managing directors of the three private commercial banks, which was held at the Bangladesh Bank (BB) headquarters on Sunday, with BB Governor Dr. Ahsan H. Mansur in the chair.
The meeting also reviewed the latest status of key indicators, including the advance-deposit ratio (ADR) and non-performing loans (NPLs) of the troubled banks.
"We've finalised the decision to conduct AQR in the banks after consultations with their chairmen and managing directors," a senior central bank official told The Financial Express on Monday.
Deloitte Malaysia, a global audit firm, has already been selected to conduct the AQR of Bangladesh's three troubled first-generation PCBs, according to the official.
The crucial audit is expected to begin this week, the official said, adding that two representatives from Deloitte Malaysia are now in Dhaka to this effect.
Under the AQR, auditors are empowered to scrutinise various aspects including loan collaterals, property valuations, and connections between loans and bank directors or their subsidiaries.
Besides, the auditors will also examine other issues like loan classification, large loan defaulters, single-borrower exposure, and asset-liability mismatches.
In addition, they will review the banks' compliance with the cash reserve ratio (CRR), statutory liquidity requirement (SLR), liquidity coverage ratio (LCR), and net stable funding ratio (NSFR).
The auditors have also been tasked to review the banks' capital position, focusing on Tier-1 and Tier-2 requirements under the Basel-III framework, it was learnt.
Basel-III is a new global regulatory standard on banks' capital adequacy and liquidity as agreed by the members of the Basel Committee on Banking Supervision.
The third of the Basel Accords was developed in backdrop of the deficiencies in regulation exposed by the global financial crisis of 2008.
Basel-III aims to strengthen the bank capital needs and introduce new regulatory requirements for bank liquidity.
Auditors will also assess loan concentration, both by sector and group, according to the officials.
"We expect that the AQR of the three banks would be completed by the end of this calendar year," another BB official said.
The Asian Development Bank (ADB) is providing funds to conduct the AQR of the banks, according to the official.
He also said the central bank is also planning to bring 11 more banks under similar audit to assess their actual financial condition.
"The list of 11 banks is yet to be finalised," the central banker said, adding that the World Bank would provide funding support to conduct the audit.
In the meanwhile, global audit firms Ernst & Young and KPMG have already completed the AQR of six banks. Ernst & Young conducted asset assessments for EXIM Bank, Social Islami Bank and ICB Islamic Bank while the KPMG carried out the assessments for First Security Islami Bank, Global Islami Bank, and Union Bank. The audit firms have already submitted their draft reports to the central bank for the next course of actions, a BB official said.
"We're now working on merging five of the six banks into a new entity in line with the audit reports," the central banker added, without further elaborations.
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