No lessons learnt from recessions



The previous global financial recessions gave a lesson that any economic fallout can be tackled smoothly if the health of banks is protected from the crisis.

But the issue was largely missed by Finance Minister AHM Mustafa Kamal in his yesterday’s budget speech despite staring down a recession.

There has been no roadmap on how to improve the financial health and corporate governance of banks.

The finance minister had committed to forming a banking commission in the quickest possible time in his budget speech for fiscal 2019-20, but he did not take any move later.

Had the government reformed the banking sector then, the country would have been in better stead to tackle the ongoing economic crisis, said Ahsan H Mansur, executive director of the Policy Research Institute.

Although the habitual defaulters are largely responsible for the existing vulnerable situation in the banking sector, the finance minister did not declare anything to bring the delinquent borrowers to book, he said.

Defaulted loans in the banking sector hit Tk 94,313 crore at the end of 2019, up 0.42 percent year-on-year, according to data from the Bangladesh Bank.

Mansur fears the pandemic will asphyxiate some weak banks, so the finance minister should have announced a merger and acquisition policy in his budget speech.

The government should have drawn up a policy on how to revise the existing bankruptcy act as many companies would be in dire straits in the days ahead due to the fallout.

Lehman Brothers, a major American investment bank, had collapsed on September 15, 2007, which deepened the then financial crisis later to a great extent.

A good number of banks also faced the same dire consequence during the previous economic slick.

“A vested quarter comprising of some private bank directors is ruling the roost. They have swindled money by way of giving loans to each other through what can be termed mutual understanding,” said Mansur, also a former official of the International Monetary Fund.

Besides, the Banks Companies Act 1991 has allowed four members of a family to become directors.

Banks have been become a family asset due to the provision of the act, Mansur said.

The finance minister should have addressed the issues to protect banks from the ongoing precarious situation, he said, adding that the corporate tax for the banking sector should have been reduced given the declining trend of profitability in lenders.

But the issue has not been taken into consideration as well, Mansur added.

Salehuddin Ahmed, a former BB governor, echoed the same, saying revising the bankruptcy act and the M&A policy were highly important considering the economy is wrought by the coronavirus pandemic.

Stimulus packages taken both by the government and the central bank will not be effective if the financial health of the banks cannot be improved, he said.

“The finance minister is highly cruel to the country’s banking sector. He has already given a set of undue facilities to the habitual defaulters,” said Khondkar Ibrahim Khaled, a former deputy governor of the central bank.

The government should turn against the habitual defaulters as well in the interest of banks and the financial sector as a whole, he added.





Source link

Please follow and like us:

Leave a Reply

Your email address will not be published. Required fields are marked *

Wordpress Social Share Plugin powered by Ultimatelysocial
Twitter
Pinterest
LinkedIn
Share