BAB wants govt not to repeat past mistakes

The anguish of the leaders of the newly-constituted Bankers Association of Bangladesh (BAB) over the blatant interference by the immediate past government in the sanction and disbursement of loans by the banks is fully justified. And their request to the adviser for finance of the interim government not to repeat the same act is also not out of context. However, most people have a gut feeling that the finance adviser and the incumbent governor of the central bank would not allow political or bureaucratic interference in the loan operations of banks. The BAB chairman is right in his observation that undue official interference had given rise to S. Alam-like oligarchs (or loan sharks). Not just government interference, regulatory indulgence and even the past leaders of the BAB had a role in pushing the banking industry into the current deplorable state.  

It had been hoped by all and sundry, particularly the bankers, that their nightmare had ended. But it is now obvious from the meeting between BAB representatives and the finance adviser held late last week that the official mindset has not changed much. The very notion of keeping afloat dying banks by milking healthy ones dry is preposterous! Why would few good banks have to bear the brunt for the failure of the past policymakers? Who allowed for so many banks to get licenses to operate in a market that could not support so many players? Why aren't assets of defaulting companies that have stolen billions of Taka worth of loans being confiscated, auctioned and sold?

This interference in private banks is uncalled for and will do little to make sick banks healthy again. Until the message goes out to bank defaulters that they are no longer safe to continue operating unless they start finding ways to repay what they have stolen, this entire refinancing scheme will be a total waste of time. The previous government went on printing billions of Taka to refinance banks that kept on giving bad loans to companies like S. Alam, Salman F Rahman and now relevant policymakers are trying to keep sick banks afloat with funds belonging to a few financially healthy banks. This is not the solution. Rather, it is direct interference in the banking operations which will do more damage than bring any relief. The government has been requested to take money from foreign lenders to bail out problem banks. That too is no longer a viable option, because the government is already in doldrums trying to make payments on existing foreign debt.

It is understandable that the central bank should have full control over activities of private and public banks. But the finance division should stay clear of trying to resurrect banks that are not salvageable. Rather, it would benefit the banking sector if rules were formulated as to how sick banks may exit the market and make provisions for paying back depositors' money over the course of years. It is interesting that no such rules exist presently and it is time to work on a policy framework to deal with the constant looting of financial institutions in this country. Bank loan defaulters need to be made accountable for misdeeds, not the rest of the financial sector for policy level failures.