The Bangladesh Bank (BB) on January 25 last issued a circular reminding the bank company directors, managing directors and officials of two top tiers of the need for complying with the sub-clause 02 of clause 18 of the Bank Company Act 1991.
The sub-clause directs the individuals mentioned in it to submit in writing the details of their commercial, financial, agricultural, industrial and other business operations and their involvement with family businesses annually. The deadline for doing so is January 20 of the following year.
Sub-clause 08 of the same clause provides for punishment to persons failing to comply with the directives given under the sub-clause 02.
Clause 18 was incorporated into the Bank Company Act through amendments in 2013.
The clause and the sub-clauses thereof are not optional, meaning that those are mandatory.
Yet the BB in the latest circular has made the submission of details as required under the sub-clause 02 of clause 18 mandatory.
It is now clear that none of the relevant parties has taken the legal provision under question seriously. Talking to a section of the media, one deputy governor admitted that until recently banks used to take the issue as an optional one. He also found the number of directors, managing directors and officials of the two top tiers of banks substantial. " From now on, no relaxation will be allowed", he said.
Why is this change of attitude on the part of the central bank after long seven years?
Bank loan scams have been aplenty in recent years. A few of them got a section of bank directors and high officials directly involved.
The two most sensational ones were: (1) Tk 34 billion Hall-Mark loan scam involving the largest public sector bank the Sonali Bank, and (2) the BASIC Bank loan scam involving Tk 45 billion.
The first scam was revealed in 2012 and the second one in 2014. In both the loan scandals a few board members and high officials were, allegedly, involved. The chairman of the BASIC Bank was the prime suspect in the bank's loan scam.
Yet the banking sector regulator, for reasons best known to it, until recently has not been serious about ensuring compliance with the relevant provisions of the Bank Company Act.
The alleged laundering of Tk 100 billion from different banks and financial institutions by P.K Halder, the former managing director of the People's Leasing, though belated, has come as a wakeup call for the central bank, it seems.
The Hall-Mark loan scandal in 2012, possibly led the relevant authorities to make a legal provision for keeping a tab on the wealth of the top notches of the country's banks. Diversion of funds by an unscrupulous section of bank board members and officials has been an old story. It has been happening since the banking institutions came into being.
However, such diversion is only possible when the institutions and individuals entrusted with the task of monitoring the operations of banks fail to carry out their jobs properly.
There is no shortage of laws in the country, but their enforcement has always been a problem. The Bank Company Act is one law that was framed in 1991 and amended in 2013 and 2018 to meet a few requirements.
If the banks and the regulator went through the copies of the reports submitted by the board members and top officials of banks, the cases of wrongdoing would be far fewer.
There is no denying that the central bank has a substantial workload. Various departments and sections of the central bank do receive scores of reports daily. Banks, financial institutions, business entities and others are the senders of those.
The department/ section concerned might be facing a shortage of manpower or logistics. Or, it could be that the people manning the section concerned are not serious about doing their jobs. Whatever may be the reason, the situation should not be as it is.
It is most likely that an unscrupulous section of bank board members and officials would conceal facts in their annual reports. If the people concerned are allowed to skip report submission, it will not be possible even to know that they are hiding facts.
So, it is important to ensure the submission of individual details about the involvement of banks' top notches in business activities and their proper scrutiny by the banks and the central banks. Such a move might prove useful in stopping future scams.
In several loan scams, the central bank traced a link between a section of board members and high officials of banks. Unfortunately, it did not take a tough stance in most of the cases. Hopefully, this time it would mean business.