2 months ago

BB lets banks defy global financial reporting standards: FRC

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Banks are not following the International Financial Reporting Standards (IFRS) while making their financial statements, said Md Hamid Ullah Bhuiyan, chairman of the Financial Reporting Council (FRC).

If they did, the value of their assets would be eroded by 40 per cent, he said, insisting that the real financial health of the banks is not reflected in their financial statements.

Speaking as chief guest at the 'CMJF Talk' organised by Capital Market Journalists Forum (CMJF) on Monday, Mr Bhuiyan said the council had made attempts to implement the international reporting standards several times but the Bangladesh Bank had come in the way.

Non-performing loans are piling up year after year, he said. "Has the money ever been back to banks?

"If you are able to bring it back, then there is no problem. But what we see in our culture is that default loans cannot be recovered. Instead, they are converting into regular loans when borrowers deposit only 2 per cent [of the entire amount].

Neither do banks get any interest nor do they get the principal amounts, said Mr Bhuiyan. Instead, lenders go for loan rescheduling.

"The borrower then went to another bank and took a loan. The system has been going on here for years," said Mr Bhuiyan.

FRC is an independent oversight body to bring trust, credit worthiness, transparency and accountability in the audit reports and accounting of publicly-listed companies.

The job of the FRC is to regulate the financial reporting process followed by public interest entities. It is to regulate the audit professionals of the country too.

Replying to a query, the FRC chairman said there is a shortage of manpower in the council. A hiring process is on and when it is done, the council will focus on the stock market first.

Financial statements have been subject to manipulation, said Mr Bhuiyan. Many weak companies showed impressive profit growths before listing on the stock market, he said, but after the IPO, profits started to decline.

Mr Bhuiyan also pointed out abnormal surges in share prices without any price sensitive information.

He even expressed doubt about the objectivity of price-sensitive information of many listed companies. "It is very important to verify price sensitive information."

Small investors are the most affected when manipulation occurs in the stock market.

The FRC chairman said the council had taken an initiative to create an auditors' panel in the next few months to ensure transparency and accountability of the audit firms.

The council has already published a gazette notification for bringing audit firms under its supervision. Auditors have to apply for inclusion in the FRC-certified list of auditors within May 30 this year, Mr Bhuiyan said.

"The auditors outside the list would not be allowed to audit any company of public interest, including listed companies, banks, financial institutions, and insurance companies."

A separate panel will be made from among the listed auditors to audit companies in the stock market.

"If a company's revenue is Tk 500 million or above, that company will be considered a public interest company. There are about 3,400 such institutions in the country."

Apart from those, there are about 2,500 microcredit institutions, which will also come under the FRC, said its chief.

"Life insurance companies never maintain profit and loss accounts. They make one account that is a revenue account. But, as per the international accounting systems, every company should have a profit and loss account, irrespective of the nature of business.

"We sent letters several times to the Insurance Development and Regulatory Authority in this regard but did not get any response to date."

Mr Bhuiyan said private companies get loans easily from banks while too many regulations and documentation discourage well-performing private companies from coming to the stock market.

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