Protecting the plunderers or the banks?
Much has been said about ‘good governance’ in the banking sector, though the authorities concerned remain impervious to all criticism. It is clear that the government and the central bank had no intention of even bothering about the Farmers Bank fiasco. It was the media that butted in. The bank had been set up by those with political clout and they adeptly pitched it into disaster within just three years. The bank could neither pay back its depositors’ money, not even pay its staff salaries.
The government remained unperturbed even when a newspaper published reports about the bank’s predicament, based on Bangladesh Bank’s investigations, fines and inspection report. The board of directors of this bank, headed by politician Mohiuddin Khan Alamgir, spent millions of taka from the institution to place ads in the papers, declaring that news of the bank’s crisis was false and fabricated. And around the same time, without permission from the central bank, they released bonds in an effort to collect funds of Tk 5 billion. Even then the government remained inert.
It was only when the bank was on its very last legs that the concerned authorities stood up and took notice. Now the finance minister too has realised that the bank directors have plundered the bank. He has said that there is no fear of the bank closing down, stating, “Those who established the bank are the ones who have looted it completely. But no bank in Bangladesh crashed. This is not allowed to happen.”
Had an ideal form of democracy prevailed in the country, then perhaps the finance minister could have been blamed for the overall predicament of the banking sector. But given the state of democracy in the country, that would not be correct. After all, he has spoken in parliament about his helplessness. BASIC Bank perhaps exemplifies this the best. He clearly said that due to political compulsions, no action could be taken against the bank’s former chairman Abdul Hai Bacchu despite proof of his complicity in the corruption.
The finance minister also has a frank admission concerning the record number of banks he has approved of in the private sector during his tenure in office. He has made in clear that the approval was given on political grounds. So the political aspect of the banking sector crisis can in no way be overlooked.
Former finance minister Saifur Rahman, who had introduced the banking company act in 1991, had also been accused of approving banks on political grounds during his two terms in office. There are the banks of BNP leader Morshed Khan and former mayor Mirza Abbas, as examples. Then former general secretary of Awami League Abdul Jalil retained his license to set up a bank during the term of former finance minister SAMS Kibria. But the present glut of banks surpasses all records.
Instead of going into whether there are political considerations behind setting up Simanta Bank or the proposed police bank, attention can be turned to the political elements within Farmers Bank. The main founder of the bank, a former bureaucrat, had been an Awami League presidium member and presently an advisor. He had been finance secretary too and had also come into focus on the ‘janatar mancha’ platform, to express solidarity with Awami league’s demand for a caretaker government at the time. He had been home minister when the bank’s approval was under process. He is presently chairman of the parliamentary standing committee for public accounts. Chhatra League’s general secretary at the time, Siddiqui Najmul Alam, was also one of the founders, though not a director at present. He, however, claimed that his friend Mehdi Hasan had bought shares of Tk 10 million in his name. Mehdi Hasan is also a founder director of the bank. According to media reports, the bank’s present executive committee vice chairman Azmat Rahman said that they were under the impression that Mehdi Hasan was Najmul Alam’s brother.
It is not that any politician or any relation of a minister cannot be a bank owner. They are not prohibited from such enterprise and can very well be bank directors. But the question is whether the former home minister and the Chhatra League leader’s business experience and source of funds were duly scrutinised when the bank was being given approval. The law calls for business experience. The regulatory authorities can err, but were any efforts made to rectify the error in due time? Unless these questions are answered, the government is likely to bear the responsibility of salvaging a couple of other ailing banks.
When the finance minister himself maintains that political consideration had been made in giving approval to the new banks, then it is obvious that the banking sector regulator, Bangladesh Bank, was more than lenient when assessing the ability and qualifications of the political persons in becoming bank owners.
The central bank is said to have taken initiative to look into the matter when evidence of irregularities in the bank surfaced. But at that moment, the chairman of Farmers Bank, as chairman of the parliamentary standing committee, took initiative to investigate Bangladesh Bank’s accounts and activities. Conflict of interests is a long dead concept in Bangladesh.
Under the prevailing banking laws, there is no scope to buy shares under other names. However, the Chhatra League leader has said he helped another director to buy shares in his name. That is a crime, plain and simple. The central bank can take due action if they had the gumption.
The central bank can appoint an administrator to tackle the bank’s crisis. The finance minister correctly said that Bangladesh has experience in dealing with banks assailed by crisis and that Farmers Bank will not shut down. In the past, ownership of banks has changed hands, funds have been injected and there has been restructuring. There may be a lack of governance in the banking sector, but no bank has ever been shut down. According to the daily Banik Barta, the government has provided state-owned banks with funds of Tk 145.05 billion in the eight years between 2009-10 and 2016-17.
Even so, the seven state-owned banks had a capital deficit of Tk 147.01 billion till March this year. The cause of this crisis is political too. The directors of these banks have been appointed politically and they have provided loans based on political lobbying and influence.
The founder directors of Farmers Bank were also well aware that no bank collapses in Bangladesh and the government will be there to bail them out. Once they are out of the crisis, with government help, their share value will go up. That is why there were reports that the chairman, even after resigning, called for an increase in shares. Some of the chairmen and managing directors of the state-owned Sonali Bank and Agrani Bank face charges of corruption and have gone into hiding, or are behind bars. Will the law be the same in the case of Farmers Bank? Will the plunderers be protected in the name of protecting the bank?
* Kamal Ahmed is a senior journalist. This piece, originally published in Prothom Alo Bangla print edition, has been rewritten in English by Ayesha Kabir.