The Financial Express

Banking commission: Independence will matter most  

Shamsul Huq Zahid    | Published: February 23, 2020 22:09:18 | Updated: February 23, 2020 22:12:01

Banking commission: Independence will matter most   

The demand for formation of a banking commission is an old one. Different people at different times brought the issue to the fore. But the government gave its proponents the cold shoulder, maintaining its (government's) usual indifference to a deepening crisis in the country's banking sector.

However, with the state of the banking sector deteriorating at an increased pace in recent years, the demand for putting in place a banking commission has only become louder. The government policymakers also could no longer be indifferent to the need for addressing the issue. So, they have started talking about it, lately.

The immediate past and the country's longest-serving Finance Minister, Mr. AMA Muhith, in the early part of last year had announced that a banking commission was in the offing. But he, later, decided to leave this important task for his successor to accomplish.

The new finance minister, at the beginning, appeared to be non-committal as far as the formation of a banking commission is concerned. Mr. AHM Mustafa Kamal soon after his taking over the rein of the finance ministry in a confident note claimed that henceforth the banks' default loans would increase 'not even by a taka'.

Later, he was, however, proved wrong as the volume of classified loans had reached a record level at the end of the third quarter of 2019. The presence of a huge volume of toxic loans remains to be one of the key weaknesses of the banking industry. 

Some days back, Mr. Kamal said formation of a banking commission was under active consideration of the government. One leading Bangla daily ran a report that speculated even the name of the possible head of that commission.

However, one cannot be sure about the formation of a banking commission since some influential quarters are opposed to the idea of having any commission or a similar body that would be tasked to go down deep into the problems facing the banking industry and suggest corrective measures.

Even if a commission is formed, much would depend on the people manning it and its terms of reference (ToR). If the government goes for constituting a commission identical to one of the scores of committees it forms from time to time then it would better not form it.

The Centre for Policy Dialogue (CPD), a private think-tank, has spoken out the minds of many who feel the urgency of streamlining the all-important banking sector of the country.

The CPD wants the proposed commission to be independent. More importantly, it sought 'enlightened support from the political leadership' so that the commission can work in a fair environment and deliver goods.

Allegations have it that a section of people used their political connections to plunder bank depositors' money. They got away with their crime, in many cases, as the regulators and relevant others, deliberately or otherwise, overlooked such misdeeds.

A case in point is the loan scam of the BASIC Bank. A central bank report does clearly mention how the then government-appointed chairman of the bank sanctioned loans worth billions of taka to clients of questionable background in exchange for hefty amount of bribe money. The Bangladesh Bank investigators have also located the house that the former BASIC chairman had purchased at a huge cost in Dhaka city. Yet the Anti-corruption Commission (ACC) has not attached that house till now. The reason for ACC inaction could be anybody's guess.

Relaxation of rules and creation of new as well as questionable opportunities to help the bank loan defaulters dodge repayments in recent years have aggravated the level of indiscipline in the banking sector.

Entry of more and more banks has only made the situation worse.

Obviously, the central bank would not enjoy the formation of a banking commission. For, the move tends to raise questions about its efficiency level as a regulatory body. But, one does need to understand the central bank's helplessness in the face of pressure that comes from outside.

However, leadership is an issue here. The relevant laws do give enormous power to the central bank. It is important to have the will to exercise that power, of course, judiciously.

One may like it or not, the truth is people, rightly or wrongly, have developed an impression that the country's banking industry is not well. This can be implied as the crisis of confidence. They need not be blamed for holding such an opinion. For, the unpalatable developments that have been taking place in relation to transfer of ownership of banks and other financial entities, loan disbursement, opening of new banks, loan scams etc., do only highlight lack of transparency and accountability in the overall financial sector.

Such a situation in the case of the most vital sector does not bode well for the economy. So, the government does need to take a tough approach as far as disciplining the banking sector is concerned. It must not give a damn about who gets hurt by its actions.




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