Bangladesh Bank Governor Atiur Rahman on Sunday expressed dissatisfaction over the credit scams revealed recently as he unveiled the latest financial stability report.

He accused some banks of not following the realistic application of the central bank guidelines that caused deterioration in classified loan status of the worst five banks.

“The overall banking sector remained stable,” he said, upon unveiling the Financial Stability Report 2012 at Bangladesh Bank headquarters in Dhaka.

Atiur said no disaster had taken place in the banking sector until now with no red flags popping up either. As a result, a base of historical stability had been established.

“We have to give highest priority to ensure the corporate governance of banks, including state-owned ones to maintain stability in the financial sector,” he said. “Bangladesh Bank issued a guideline detailing instructions regarding this, but the scenario of realistic application is not absolutely reassuring.”

To bring back a more assuring situation to establish corporate governance, member of directors in the banks’ boards needed appropriate attention, he said. Bangladesh Bank will provide all kinds of support in this regard.

“Sharp price correction in the stock market and several fund forgery has affected the banking sector negatively,” said Bangladesh Bank Deputy Governor SK Sur Chowdhury. In addition to classified loans being increased because of the central bank’s strengthened policy and aggressive lending tendency of the banks.

So central bank has planned to strengthen the supervision to restore discipline in this sector, he said.

According to the financial stability report, the classified loans of the banking sector recorded a moderate rise at end-December 2012 compared to end-December 2011, which could largely be attributed to the new stricter loan classification and provisioning regulations of the central bank.

Classified loan concentration ratios of the 5 worst banks and 10 worst banks were 62.7% and 73.2% respectively at end-December 2012. Almost two-thirds of the classified loans are concentrated in three state-owned commercial banks and two state-owned specialised development banks.

The classified loans in the state-owned commercial banks are higher due to lack of efficiency in fund management, extending obligatory financing towards social and economic priority sectors and politically motivated lending.

The non-performing loans to total loans ratio has increased to 10% in FY12 from 6.2% in FY11. More than two-thirds of the total non-performing loan of Tk285bn is bad or loss.

The Bangladesh Bank on Monday directed the commercial banks to reduce their stock market investment to 25 per cent of the total of four components of core capital in the share market by 2016 in line with the newly enacted bank companies act. 

The BB directive also said from now on banks have to submit their stock market investment report to the offsite supervision department of the central bank within 10 days after a month ends.

 
It also provides a chart for the stock market reporting of the banks.

According to BB directive, the banks can invest into shares, corporate bonds, debentures, mutual funds or any other stock market instrument or funds up to 25 per cent of their core capital that includes paid-up capital, share premium, statutory reserve and retained earnings.

The directive said the banks’ loan to any subsidiary company which is directly or indirectly involved with the stock market operation will be counted as stock market investment. 

The directive also said the loan to banks’ subsidiary merchant banks or any other company will follow the single borrower rules of the central bank. 

It, however, said banks’ loan to stock dealers for buying A and B category shares/debentures can be 60 to 70 per cent of the market price but it cannot be more than Tk 3 crore. 

The BB directive issued on the day also spelled out the investment which will not be considered as capital market investment. 

It said land ownership documents and mortgage paper, shares of non-listed public enterprises, sub-debt instruments issued by other banks,

share of Central Depository Bangladesh Ltd and stock exchanges will not be considered as capital market investment. 

Earlier, banks could invest up to 10 per cent of their total liabilities in the capital market.

The new limit means that the exposure limit for banks in the capital market would be lower after 2016.
The BB directive comes after the parliament in July passed the Bank Company (Amendment) Bill - 2013 which redefined banks’ capital market exposure. 

The act said that within three years of enactment of the law the banks have to lower their investment to the new limit.
Capital market stakeholders said that the banks currently have around 2-3 per cent of their liabilities in stock market investment. 

The bill also keeps a provision of maximum Tk 20 lakh as fine for investing more than the new limit in the share market by the bank companies.

In case of continued violation of this provision, another Tk 50,000 will be fined per day from the second day of breaching the law.

DHAKA, SEPT 16: Bangladeshi private commercial bank IFIC is all set to buy a majority stake in Nepal Bangladesh Bank Limited, a leading commercial bank in the land-locked Himalayan state.

“The IFIC will purchase a 51 per cent share in the bank and take the responsibility of operating it,” said Mohammad Lutfar Rahman, chairman of Nepal Bangladesh Bank Limited.

As many as 42 per cent shares had already been purchased and the remaining 9 per cent would be bought very soon, he added.

Lutfar was appointed the chairman of Nepal B in February this year. Lutfar was the first Bangladeshi national to become the chief of aangladesh Bank foreign bank.

A fully general commercial bank, not only limited to dealing with business between Bangladesh and Nepal, Nepal Bangladesh Bank has a bright future as it made a profit of Nepalese Rs. 135 crore last year, Lutfar said.
Lutfar Rahman said that they started investing the money abroad after obtaining formal permission of the Bangladesh Bank. The foreign currency was transferred from the Bangladesh Bank to the Reserve Bank of Nepal.
Currently, the bank has a total of 21 branches spreading across Nepal. 

It has plans to increase the number of branches to 26 very soon. The Nepal Bangladesh Bank Limited was established in 1994, in collaboration with IFIC. 

Earlier, the IFIC held a minority stake in the foreign bank. The bank was launched with the goal of becoming the bank for everyone in Nepal.

Over the years, it succeeded in increasing the paid up capital to Rs. 2 billion. It is headquartered in New Baneshwor, Bijuli Bazar, Kathmandu. With a network of 21 branches spread across Nepal, the Nepal Bangladesh Bank has a chain of 28 ATMs. 

The bank also provides holiday banking and has launched services like e-banking, mobile banking, e-top-up service, branchless banking and other e-products.

It has also launched a special deposit product for women.
According to sources,

the bank has made its services available to almost all the top business houses. 

Nepal’s top exporters and importers have relationships with the bank with a substantial volume of foreign business, which has enhanced the bank's popularity in the international trade font.

 NRB Bank recently opened a branch at Gulshan in Dhaka.

Dr. Gowher Rizvi, Adviser to the Prime Minister, inaugurated the branch as chief guest, said a press release on Monday.

Iqbal Ahmed OBE, Founder Chairman, NRB Bank Limited, Muklesur Rahman, Managing Director and CEO of NRB Bank Limited and other senior officials of the bank were also present.

While speaking, Dr. Gowher Rizvi congratulated the inception of NRB Bank in Bangladesh with the promise to support entrepreneurship and connect Bangladesh with the international market.

Iqbal Ahmed OBE, Founder Chairman, NRB Bank Limited said, "I dream of unlocking a new horizon to the Bangladesh economy by facilitating NRB inward investment to Bangladesh and assisting Bangladeshi enterprises to access international markets and also delighted to start our first branch operation at Gulshan."

Muklesur Rahman, Managing Director and CEO, NRB Bank Limited said, “At NRB Bank, we would like to position our-self as the destination of opportunities and making it the next growth frontier.”

Standard Chartered Bank, for the 5th consecutive year, has been named the “Best Foreign Commercial Bank in Bangladesh” by FianaceAsia, a leading financial publication in the region.

The bank received FinanceAsia 2013 Country Awards, a prestigious award for its achievement in the banking field, said a press release.

Jim McCabe, Chief Executive Officer of Standard Chartered Bank Bangladesh received the award at FinanceAsia 2013 Country Awards Gala Dinner at Hotel Fort Canning in Singapore Thursday.

Jim McCabe said, “We are delighted with this win, and we’re excited by the future for Standard Chartered Bank in Bangladesh. We are thankful to all our clients and colleagues of the bank for their support in winning this prestigious award once again.”

“Standard Chartered Bank is the largest foreign bank in Bangladesh with 26 Branches and Booths, 97 ATMs and 19 Financial Kiosks, employing over 1,700 people,” he added.