Banks in disarray to finalise financial statements

The annual financial statements of more than 50 per cent of private sector banks have been delayed, leaving them unable to finalise their accounts or declare dividends.

Such a situation has arisen as the banks are trying to follow the rules and regulations of the Bangladesh Bank.

Some 21 listed banks have been unable to finalise their financial statements, even after convening board meetings for that purpose. Besides, some banks have canceled scheduled meetings at the last moment.

State-run banks are also facing similar difficulties. According to bank sources, some banks finalised their reports but did not receive a no-objection certificate (NOC) from the central bank. On the other hand, some banks got their NOC revoked after receiving it from the central bank. Hence, some banks had to cancel their board meetings at the eleventh hour.

The listed banks are obliged to finalise and publish their financial statements within four months after the financial year. However, most banks have failed to meet this deadline.

In March, Bangladesh Bank issued new policies over dividend declarations. Under the new rules, banks that received deferred benefits from the central bank and failed to maintain capital deposit or adequate provisioning are barred from paying dividends for 2024. As a result, most banks have been caught in a regulatory bind.

Additionally, there has been no consensus with Bangladesh Bank on several financial issues – such as hidden default loans – for banks that underwent changes in ownership or management after 5 August.

Sources at Bangladesh Bank said a political leader, who is very influential in the present context, pressured the central bank to offer regulatory leniency to banks under his control, but the issue remains unresolved. Financial statements of the banks have been stuck too.

Earlier, some banks have faced fines for failing to publish financial statements on time. This year, however, Bangladesh Bank has requested the government to grant an extension, citing the unusually high number of pending reports.

Speaking to Prothom Alo, Bangladesh Bank executive director and spokesperson Arif Hossain Khan said, “The time for approving the annual financial statements has expired. If the government permits, the banks will be given an additional period. Bangladesh Bank is awaiting a decision from the government.”

As per regulations, Bangladesh Bank audits activities of all banks. Before that, the banks carry out initial audits by themselves and external audit firms. All financial information, including defaults, is revealed in the audits. Later, the banks, audit firms, and Bangladesh Bank finalise the financial statements. According to the final reports, the central bank determines the dividend limits for the banks.

According to Bangladesh Bank sources, the central bank carried out audits professionally this year after a long time with officials visiting many projects of the banks. Besides, board of directors were reshuffled at 14 banks, mostly facing loss.

Of them, S Alam Group-controlled Islami Bank, Social Islami Bank, First Security Islami Bank, Global Islami Bank, Union Bank, Al-Arafah Islami Bank, Commerce Bank, and National Bank faced losses.

Besides, IFIC Bank, controlled by adviser to former prime minister Sheikh Hasina, Salman F Rahman, UCB Bank of former land minister Saifuzzaman Chowdhury and EXIM Bank of former president of Association of Bankers, Bangladesh, NRB Bank and NRB Commercial Bank face crisis. These banks were also marred by various irregularities.

Other than this, eight listed– Dhaka Bank, AB Bank, Mercantile Bank, ONE Bank, Premier Bank, South Bangla Agriculture and Commerce Bank, Southeast Bank, and Standard Bank – and several other banks could not finalise their financial statements.

A member of the board of directors of a first generation bank told Prothom Alo, “The meeting agenda of the bank’s board of directors included the approval of financial statement on Wednesday as they had the no objection certificate (NOC) from Bangladesh Bank. After the meeting started, we learned that financial statement cannot be approved because the central bank directed to return the NOC. So, the meeting no longer proceeded.”

Besides, state-run banks including Sonali Bank, Janata Bank, Rupali Bank, BASIC Bank and Bangladesh Development Bank could not finalise their financial statements in the stipulated time.

Meanwhile, 15 out of 36 banks listed in stock markets finalised financial statements. They are City Bank, BRAC Bank, Pubali Bank, Dutch-Bangla Bank, Bank Asia, Eastern Bank Limited (EBL), Jamuna Bank, Midland Bank, Mutual Trust Bank (MTB), NCC Bank (National Credit and Commerce Bank), Prime Bank, Shahjalal Islami Bank, Trust Bank, Uttara Bank, and ICB Islamic Bank. Five of them saw a rise in profits and 10 witness a drop.