Crisis in banks deeper than anyone could imagine

Experts and businesspeople yesterday urged the newly formed interim government to adopt urgent measures to ensure good governance in the banking sector, saying that the crisis in financial institutions is much deeper than anyone could imagine.
They also demanded punishment for those involved in financial crimes in banks and financial institutions.
“The banking sector has become fragile over the past 15 years during the rule of Sheikh Hasina-led government. The situation is even worse than one can imagine,” said Selim RF Hussain, chairman of the Association of Bankers, Bangladesh.
That fragile state is illustrated by the amount of non-performing loans in the sector, which hit Tk 182,000 crore in March this year, up from around Tk 22,000 crore in 2009.
“You see the names of some banks in the newspaper [for corruption]. But many are yet to be unveiled,” Hussain added.
Hussain made the remarks at a dialogue organised by the Centre for Policy Dialogue (CPD) at the Lakeshore Hotel in Dhaka to discuss and address the challenges facing the interim government.
It included representatives from civil society, economists, bankers, entrepreneurs and students.
After restoring law and order, the priority should be focusing on the banking sector, Hussain said.
“The interim government should revive the central bank and I think this has already started with the appointment of a new governor.”
The banker also congratulated protesting students, saying: “We now have freedom of speech. We did not have it in the last 14-15 years.”
Hussain, also managing director and chief executive officer of BRAC Bank, then criticised bureaucratic tangles in the system.
Shams Mahmud, director of the Bangladesh Garment Manufacturers and Exporters Association, demanded stern action against corrupt directors of banks.
Accounts belonging to directors of scam-hit banks should be frozen and they should not be allowed to leave the country, he said.
He also said it is important to prepare white papers to address data anomalies, especially in light of Bangladesh’s impending graduation from least developed country status in 2026.
“There are major mismatches in the data based on which economic indicators were calculated. So, a white paper should be formulated on the actual economic scenario. Then we can have a vote. If a majority agrees, LDC graduation can be delayed by 10 to 15 years,” he added.
Mahmud also labelled former National Board of Revenue Chairman Abu Hena Md Rahmatul Muneem as the leader of corruption, saying he had destroyed the tax system.
The government removed Muneem from his post yesterday.
Inadequate revenue collection, slow pace of implementation under the Annual Development Programme, and significant government borrowing from the banking sector have squeezed the country’s economy, according to Fahmida Khatun, executive director of the CPD.
“Hikes in commodity prices, rising default loans and a liquidity crisis in the banking sector, slow export earnings, slow flow of remittance, stagnation in private sector investment and other problems have to be resolved quickly,” she said.
To boost the economy, initiatives must be taken to solve the problems plaguing the power and energy sector. The deterioration of foreign exchange reserves, the declining trend of imports, and the massive devaluation of the taka must also be addressed, Fahmida added.
Another issue is that a large portion of the youth remain unemployed due to a lack of employment opportunities stemming from bribery and corruption, unreasonable job expectations, financial constraints or because they are waiting to land government jobs.
AKM Fahim Mashroor, chief executive officer of Bdjobs.com, said the government had violated civil rights by spying through digital devices over the past  15 years.
“In an independent country, why am I not able to use technology freely?” he questioned.
He emphasised the disclosure of all types of software used to violate human rights and civil rights, adding: “A white paper is required to explain how civil and human rights have been curtailed.”
He further mentioned that the entire banking sector had been tailored to support corporate entities, depriving small and medium enterprises.
Legal and constitutional reforms to prevent the return of injustice, corruption, and authoritarianism were sought by Badiul Alam Majumdar, secretary at SHUJAN: Citizens for Good Governance.
He said three crimes occurred during the past government’s tenure: crimes against humanity, criminal offences, and financial crimes. He added that the government should be given the chance to defend its actions in a fair trial.
Majumdar also lamented the use of law enforcement as a tool of the ruling party, he said.
One of the coordinators of the Anti-Discrimination Movement, Nusrat Tabbassum, said the interim government should reform law enforcement agencies which were destroyed by the past government.
She further said the interim government should work to restore the country’s reputation, which was lost when the government imposed a five-day internet blackout in mid-July to quell protests that left more than 500 people dead as of August 7.
Mushtaque Raza Chowdhury, convenor at Bangladesh Health Watch, said the interim government should form a health commission to make a roadmap and look into existing healthcare services.
Through this commission, it can leave a legacy for future governments, he said.
Prof Mustafizur Rahman, a distinguished fellow at the CPD, demanded justice for recent injustices and loss of lives.
“We need a platform or framework with students and general people. They will work as guarantors of the expected reforms, which help an inclusive society,” he said.
“The country has fallen into a vicious cycle. We have deviated from economic progress due to high inflation, low investment and anarchy in the banking sector.”
In the last 53 years, Bangladesh has overcome many first-generation challenges. But we still have not overcome second-generation challenges, he added.