Managing bad assets, reopening closed factories stressed

Bangladesh Bank's new governor rolls out a to-do list focused on continued reforms to manage banking sector's distressed assets and reopen closed factories for economic pickup and job generation.

Bangladesh Bank will continue its reform programme to make banking services faster and more efficient for both the central bank and commercial banks, Governor Md Mostaqur Rahman told bankers Sunday.

He said the regulator would step up efforts to resolve distressed assets in the banking system--much of the money trapped in businesses and industries of embattled owners shut down amid political upheavals.

The governor made the remarks at his maiden meeting with the governing council of the Association of Bankers, Bangladesh (ABB), led by its chairman Mashrur Arefin, at the central bank headquarters.

Present at the conclave, close on the heels of reshuffle in the BB hierarchy, were 19 chief executives of commercial banks.

Mr. Arefin, managing director and chief executive officer of City Bank PLC and chairman of the ABB, billed the meeting constructive as the governor listened carefully to the concerns of bank executives while outlining his policy priorities.

"The governor was very cordial and chaired the meeting with humility and warmth," Mr Arefin told The Financial Express.

"He listened patiently to the views of all 19 CEOs and outlined several of his core priorities."

According to the leading banker, the business-tycoon-turned banking regulator emphasised the need to create a business- and manufacturing-friendly environment aimed at generating up to 10 million new jobs.

He also stressed the productive use of distressed assets arising from non-performing loans, including the reopening of closed factories.

The governor also highlighted the potential of a "one village, one product" initiative to promote entrepreneurship and exports.

Mr Arefin said citing the cheese produced in Ashtogram in Kishoreganj as a practical example, the new BB chief suggested that banks could help such locally specialised products reach global markets through district-based development initiatives.

The governor also made several commitments during discussion, according to ABB officials.

He quoted the central bank governor as saying that the executives should report any political pressure directly to him.

He also assured bankers that the central bank would respond more promptly to issues raised by ABB, with faster decisions aimed at reducing the cost of doing business.

The central bank also plans to move towards selective deregulation, beginning with allowing banks to negotiate rental and lease agreements independently within defined regulatory guidelines.

The governor also pledged efforts to facilitate the release of overdue funds related to export incentives, Export Development Fund (EDF) reimbursements and remittance incentives.

"We are professionals and we want the governor to succeed," Mr Arefin said, describing bank chief executives as key stakeholders in the reform process.

He added that bankers welcomed the governor's proposal for the central bank and commercial banks to jointly host a "Bangladesh Day" event for foreign correspondents and international lenders later this year.

ABB leaders also requested the central bank to expedite the release of remittance-related incentives and improve operational efficiency under the EDF.

Syed Mahbubur Rahman, managing director and chief executive officer of Mutual Trust Bank, who also attended the meeting, said bankers discussed the issue of lowering interest rates but stressed that borrowing costs alone would not revive investment.

"We argued that reducing interest rates is only one factor and it cannot revive the investment alone," Mr Rahman told the FE writer. "Reliable power and gas supply and other structural issues must be addressed to make business and investment more vibrant."

He said bankers also highlighted the importance of refinancing schemes, particularly for small and midsize enterprises, as a way of supporting entrepreneurs and stimulate economic activity.

jasimharoon@yahoo.com