Islami Bank, Social Islami Bank, four others allowed to open LCs

In addition to restricting the lending activities of six banks facing liquidity crises due to irregularities, Bangladesh Bank had imposed a 100 per cent margin requirement on their letter of credit (LC) opening activities.

However, the regulatory body has now lifted these restrictions in the interest of the banks' recovery. As a result, the banks can now open letters of credit for import based on demand.

The boards of directors of these banks have already been changed, and Bangladesh Bank has extended a loan of Tk 225 billion to help resolve the liquidity crisis.

The six banks Islami Bank, First Security Islami Bank, Social Islami Bank, Union Bank, Global Islami Bank, and Bangladesh Commerce Bank. All six were previously owned and controlled by the S Alam Group.

In an effort to improve their financial and business conditions, recently Bangladesh Bank informed these banks that there is no longer a need to reserve a 100 per cent margin for opening letters of credit.

However, other banks must continue to adhere to the central bank's guidelines regarding letters of credit .

Officials from the affected banks believe that the central bank’s decision will enable them to restart their import businesses. Many customers had previously been unwilling to deposit the full 100 per cent margin required for import transactions, which led them to switch to other banks. With the lifting of this restriction, these customers may now return.

All six of these banks were owned and controlled by the controversial S Alam Group. Among them, Islami Bank, Social Islami Bank, and Bangladesh Commerce Bank were acquired by the group after 2016.

First Security Islami Bank, Union Bank, and Global Islami Bank were already under the group's control. The Awami League government had been accused of facilitating the plundering of these banks.

After the change in government, the boards of these banks were dissolved, and the opportunity for embezzlement through money printing was halted. However, depositors were still unable to withdraw their funds. Later, the new government began lending money to these banks, printing currency specifically to benefit the depositors.

In an interview with the British media outlet Financial Times, the current governor of Bangladesh Bank, Ahsan H Mansoor, revealed that some former officials of the defence intelligence had played a role in the takeover of these leading banks.

It is estimated that approximately 2 trillion taka (US$16.7 billion) was laundered out of Bangladesh through the takeover of these banks. Methods such as providing loans to new shareholders and inflating import costs were used in the process.

The governor of Bangladesh Bank said, “This is the largest and most extensive case of bank embezzlement by any global standard. There has been no other instance of such scale anywhere else. It was state-sponsored and could not have happened without individuals from intelligence agencies essentially forcing former bank CEOs at gunpoint.”

Ahsan H Mansoor further explained that, with the assistance of the Directorate General Forces Intelligence (DGFI), Mohammad Saiful Alam, the founder and chairman of the S Alam Group, and his associates “extracted” at least 10 billion dollars from the banking system. According to the governor, “They were approving loans for themselves on a daily basis.”

In response, the law firm Quinn Emanuel Urquhart & Sullivan, acting on behalf of Saiful Alam, issued a statement on behalf of the S Alam Group. The statement dismissed the governor's allegations as “baseless” and asserted that “The interim government’s coordinated campaign against the S Alam Group and other prominent business institutions in Bangladesh has failed to adhere to the fundamental principles of due process.”