Arbitrary introduction of mergers caused further unrest in banking sector: TIB

Transparency International Bangladesh in a statement on Tuesday said that the arbitrary announcement of certain bank mergers, coupled with concerns among well-performing banks involved in the process and unwillingness of some underperforming banks, had worsened anxiety, unrest, and uncertainty within the banking sector. The TIB believes that such instances have cast doubts over the entire process even before it started. ‘The central bank has initiated steps to merge underperforming banks with stronger counterparts in order to save weak banks in the sector, which is supposed to be considered as being in line with global practices related to tackling crisis in the financial sector,’ TIB opined. However, global standards and policies including the Bangladesh Bank’s own policies have been ignored to complete this sensitive and complex task hastily, said the statement. The anti-corruption organisation asserts that the lack of transparency in the bank merger process, particularly concerning the management of default loans and issues of accountability within weak banks burdened by default loans, essentially sidesteps the main problem of the crisis and gives impunity to the factions responsible for loan defaults and forgery. According to the merger policy issued by the Bangladesh Bank, underperforming banks are allowed to express their interest to merge with financially sound banks following the assessment of assets and liabilities by an auditor firm enlisted by the central bank and disclosing the details in the current year. Considering the evaluation of assets, there are provisions for good banks to voluntarily express interest in initiating mergers with weaker banks. Highlighting that the central bank can only resort to forceful mergers if the initial steps fail, said the statement. TIB executive director Iftekharuzzaman stated, ‘Based on media reports, only one weak bank has shown interest in voluntary merger, and conversely, it’s not necessarily the case that the financially sound banks mentioned in the process have willingly and consciously engaged in it.’ This suggests that the entire process has been imposed on them arbitrarily, which is a clear violation of the declared policies, he said. Moreover, how fair and reasonable is it to transfer the burdens of default loans and forgeries to good banks without first assessing the assets and liabilities of the weaker ones? It appears that the ongoing actions are akin to prescribing paracetamol for cancer treatments, said Iftekhar ‘On one hand, the culture of loan defaults is exacerbated by shielding factions responsible for them and forgery under the guise of mergers. Contrarily, significant attempts are underway to compel good banks to digest weaker ones as a result of their success. This has fostered an atmosphere of anxiety and restlessness across the entire sector,’ he pointed out. Expressing apprehensions that attempts to salvage weak banks might backfire, the TIB ED remarked: ‘Government-government, private-government, and private-private mergers are all being considered. However, it remains unclear on what basis these banks have been prioritised, or how the decision was made regarding which financially sound banks would merge with which weak ones,’ said Dr Iftekhar. Additionally, some banks not yet mentioned in the merger process have been kept afloat through liquidity assistance. However, two government-owned banks, known for their strong performance, are slated to absorb two underperforming banks despite having significant amounts of default loans themselves, he urged. ‘Given these circumstances, it is unrealistic to believe that simply merging banks, without ensuring effective accountability-based good governance to address the basic challenges in the banking sector, will resolve the problem or safeguard the interests of clients,’ he opined.
Published on: 2024-04-23 17:30:14.88902 +0200 CEST