Form 'Banking Enquiry Commission' forthwith

The government should move to form a 'Banking Enquiry Commission' immediately to address the problems and irregularities that are 'eating away' at Bangladesh's financial sector, says an expert.

"The core problem in our banking sector today is a lack of good governance," former Deputy Governor of Bangladesh Bank Khondkar Ibrahim Khaled told a function arranged Sunday in Dhaka on a BIBM Research Almanac focused on the state of banking in the country.

"This is obvious that the banking sector is not running well. The problems have already been pinpointed and it is high time to act," said Mr Khaled, who had led one of recent probe bodies on financial-sector scam, namely stock-market manipulation and debacle.

In this context, he mentioned that the Finance Minister had already said that he would not form a Banking Commission right now. "But even if that is not possible, a Banking Enquiry Commission, at the very least, should be formed," the former Deputy Governor of the central bank said.

"Having such a commission would help us to get out of the problems that are eating away at our banking sector," he told the technical session of the daylong programme organized by Bangladesh Institute of Bank Management or BIBM.

Earlier, during the inaugural session of the event, Finance Secretary Mohammad Muslim Chowdhury asked the banking sector to get ready for increased technological changes that would happen within the financial sector in the years ahead.

"Human interface is already getting minimized, and within five to ten years time, most of banking operations will shift from human interface to technological interface," the Finance Secretary told the meet.

He said the time has come to ponder whether the term banker will exist in the near future or not.

"In this context, there are needs for increased research in our banking arena on the fintech issue and its possible impact."

Afterwards, a series of keynote papers on various research topics conducted by BIBM were presented at the event, in the institution's bid to focus on variegated issues facing banks and on possible remedies.

In a keynote paper called "Sustainability Reporting Practices in Banks of Bangladesh", the researcher pointed out that out of total of 30 listed banks in Bangladesh, only 15 had made separate sustainability disclosure in their corporate annual reports in between 2011 and 2015.

In this context, researchers said that the central bank should give pragmatic policy and motivational support apart from confirming publication of report by all banks.

Another research paper on the status of Fund Transfer Pricing in the commercial banks of Bangladesh showed that around 58 per cent of the country's banks have no FTP policy.

A faulty FTP methodology or a biased framework will send wrong signals by creating an unintended balance-sheet structure in the form of disproportionate mix of asset portfolios on the asset side and liquidity holes on the liability side, researchers said.

Therefore, banks in Bangladesh should implement matched maturity well-responsive FTP Framework by eliminating overreliance on offline systems requiring manual intervention and by revising the simplistic assumptions in the implementation of the FTP framework, they added.

In another keynote paper entitled 'Addressing Disaster Risk by Banks: Bangladesh Perspective', researchers showed that although Bangladesh is among the top five vulnerable countries on earth, the proportion of insured risks appeared to be even much lower than the Asian average.

In this context, they observed that a developed insurance market and attractive targeted insurance products might be the solution.

In addition, researchers at the event also identified a lack of board-level awareness about the magnitude of the impact of implementing Basel III as a challenge facing banks in Bangladesh.

"Basel-III requires the involvement of the senior management in the process of identification, evaluation and mitigation of risks," said a keynote paper titled 'Impact of Basel Accords in the Banking Sector of Bangladesh'.

"The senior management and the board members may use some sort of supervisory and monitoring techniques to ensure the technical and other executives are engaged in risk-mitigation activities and the board is satisfied with the action taken by them," it added.

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