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A decisive regulatory move for licensing digital banks flops as an emergency board meeting of Bangladesh Bank backtracked following strong protest from officers against such last-minute decision during governmental transition.
Sources said a strong protest from the BB officers' platform upset the applecart.
The central bank called emergency board meeting for Monday afternoon, a day before the new elected government takes oath, and digital bank licence-related affairs was on top of the meeting agenda.
Talking to The Financial Express, BB spokesperson Arief Hossain Khan said the board meeting ended without decision. "The evaluation progress on the digital bank-licence applicants has been shared among the board directors."
Seeking anonymity, a BB official said the digital bank-licensing issue was largely discussed at the meeting and some of the board members expressed their dissatisfaction over the BB officers' platform's press meet.
"They (some of the directors) raised question over BB officers' press briefing against the board meeting without permission of the central bank leadership," the official said.
But the meeting ended without any decision, according to the central banker.
Earlier in the day, Bangladesh Bank Officers' Welfare Council stood in protest against the move to grant a digital-bank licence, calling the initiative "desperate and undemocratic" and a serious breach of administrative norms at a time when the process of forming a new government gets underway.
The association of central bank officials also hinted that the planned licence for 'bKash' raises a potential "conflict of interest" involving the governor.
Council leaders made the remarks at a press conference held at the central bank's headquarters on Monday morning.
A day earlier, the organisation's president and the secretary had written to Governor Ahsan H Mansur for suspension of the Bangladesh Bank board meeting convened to consider approval of digital bank licences.
Council president AKM Masum Billah and general secretary Golam Mostafa Srabon, among other senior leaders, were present at the press conference.
Central bank officials said the ownership structure and shareholding issues must be thoroughly reviewed in line with the Bank Company Act and existing regulations. They also stressed the need for caution in taking major policy decisions during a political-transition period.
In their letter to the governor, the council leaders wrote that they had learned about the arrangement of a board meeting aimed at granting digital-bank licences at a time when state power is poised for change after the election.
They described the initiative as a violation of ethical and administrative norms and warned that it could heighten risks in the banking sector.
The letter said taking any long-term and controversial policy decision at a sensitive institution like the central bank while a new government is in the process of assuming office would amount to a serious breach of administrative propriety.
It notes that the incoming government may have its own economic plans and reform agenda, and therefore any rash move to issue digital-bank licences would be considered "impulsive and undemocratic".
The council further told the governor that he had previously served as chairman of a bank belonging to the group now being considered for a digital-bank licence. Under the Bank Company Act 1991 and internationally recognised corporate-governance principles, his participation in the decision-making process would constitute a direct conflict of interest.
"Any attempt to extend undue advantage to a former workplace or related group would call into question the central bank's neutrality," the reminder letter reads.
Questioning the necessity of issuing fresh digital-bank licences, the council points out that many existing banks are already struggling with liquidity stress and mounting non-performing loans, and that granting new licences could further increase sectoral risks.
The letter also warns that any attempt to legitimise loans or irregularities of a particular group through changes in laws or regulations would tarnish the autonomy of the central bank.
In this context, the council placed three demands: suspension of the board process and digital bank-licensing move, verification of the rationale for issuing licences through neutral evaluation in line with policy guidelines, and recusal from approving files involving any group where personal linkage exists.
Thirteen entities, including mobile financial service providers, telecoms operators, commercial banks, and large conglomerates, have applied to the Bangladesh Bank for digital-bank licence.
bKash, one of the country's leading mobile financial service providers, applied for 'bKash Digital Bank'.
VEON and Square have jointly applied for 'Nova Digital Bank'. telecoms operator Robi submitted an application for 'Boost', while conglomerate Akij Resources applied for 'Munafa Islami Digital Bank'.
Other applicants in the queue include Japan-Bangla Digital Bank by DBL Group, British Bangla Digital Bank PLC, Digital Banking of Bhutan by DK Bank, Amar Digital Bank by 22 microfinance institutions, 36 Digital Bank PLC by 16 individuals, Amar Bank by a group of NGOs, App Bank by a UK-based investor, Moitri Digital Bank PLC by microfinance institution ASA, and Upokari Digital Bank by IT Solutions Ltd.
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