In late 90s, an internationally reputed magazine published an article on banking sector in Bangladesh which quoted the then governor of Bangladesh Bank as saying "Bangladeshi banking system is on the verge of collapse". This created a very poor impression about our country's banking business in the international banking arena, especially in the developed world's banks, writes Nironjan Roy, a Toronto-based banker. The article was published by the Financial Express (FE) on Saturday.
Many countries refused to accept the letters of credit (LCs) and many correspondent banks also declined to add confirmation to the LCs issued by commercial banks of our country because views expressed by the country's central banker is always considered with serious attention.
Since then fifteen years have elapsed and our country has achieved praiseworthy success in almost all the economic as well as social parameters. Our banking sector has taken a very leading role in the country's economic development. Banking industry has widened substantially in every respect, including the number of banks & financial institutions and volume of deposits & loans.
Country's foreign reserve has reached to 24 billion US dollar which was about 1.0 billion dollar only when that derogatory article was published. Sovereign rating of our country has considerably improved as many international rating agencies have rated our country with very good score.
Bangladesh's success story has been brought to the international forum by the Bangladesh Bank. To speak the truth, Dr. Atiur Rahman, the present Governor, has taken a leading role in depicting the country's economic and social achievements at the international level. Dr. Atiur Rahman assumed the responsibility of the Chief Executive of the country's central bank in 2009 at a very critical juncture when the worst financial crisis since the Great Depression in 1930 was sweeping over the developed world and our country had just come out of a tumultuous political situation. Dr. Atiur Rahman is a renowned economist of our country and his appointment as Governor was the most appropriate decision of the government.
The core functions of a central bank is arresting inflation, generating employment, augmenting domestic and foreign investment through an effective monetary policy. But our central bank mostly focused in the past on regulating country's commercial banks.
Under the leadership of Governor Dr. Atiur Rahman, Bangladesh Bank has been able to bring about diversity in its functions and many revolutionary measures have been taken by the central bank. Institutional banking services have reached to the doorstep of the poor people, specially the farmer.
Mobile banking is now a very popular means of retail financial transaction. Environment has been integrated with banking business though introducing Green Banking. Corporate Social Responsibility has been made the Management part of the bank and implementation of BASEL-III is in the process.
Country's clearing system has been made automated and stringent measures against Money Laundering and Terrorist Finance has improved the compliance status of country's banking sector. All of these tremendous successes have been achieved during the leadership role of Governor Dr. Atiur Rahman.
Dr. Atiur's spectacular success as economist and as Governor of central bank has been applauded not only within the country but also in the international arena. In recognition to his contribution he has been rewarded with many prestigious international awards.
Last year, Dr. Atiur was awarded as the best banker in Asia Pacific region by a widely circulated magazine The Banker, a publication of internationally reputed Financial Times, because of his relentless efforts and contribution in the country's monetary achievement. Previously he received the award of Indira Gandhi Gold Medal and Guci Award of Philippine.
Apart from successfully running the country's central bank, Dr Atiur has participated in innumerable nationally and internationally held seminars and discussion meetings where he has presented keynotes highlighting the country's success in financial and economic sector.
He has taken proactive initiative in spearheading Bangladesh's success in economic development in the international forum while attending World Bank-IMF Spring Meeting 2015, held in Washington, USA during the middle of April.
He did not confine his official visit to mere attending the IMF Spring meeting, rather he capitalised such an ample opportunity by attending many other incidental seminars and discussion forums and even personally meeting with many of his counterparts. Taking part in all the discussions and seminars, he highlighted Bangladesh's achievements in the economic advancement made during the last five years.
Queen Maxima of Netherland, in such a programme, was all praise for Dr. Atiur Rahman for his contributory role in Bangladesh's financial inclusion.
As a panel discussants at the IMF Spring meeting, Dr. Atiur Rahman spoke speech on "Leveraging Migration and Remittance for Post - 2015 Development Financing; The Bangladesh Context". Besides, he addressed the 7th Annual G24/AFI Leaders' Roundtable Meeting held in Washington DC at IMF Headquarter.
He also attended a public-private dialogue on "Delivering Scaled-up Finance for Climate action as a speaker at the World Bank - IMF Spring Meeting - 2015 on April 16in Washington DC. The event was organised by the European Investment Bank.
Governor. Atiur Rahman spoke on April 17 as one of the panel members in the discussion meeting organised during the World Bank-IMF Spring meeting on "Illicit Financial Flows". Raymond W. Baker, President, Global Financial Integrity, also spoke there and praised Governor Atiur Rahman's role in preventing money laundering and terrorist financing in Bangladesh.
It may be mentioned here that Global Financial Integrity is a Washington-based non-profit organisation which provides policy support to all countries and banks fighting against money laundering and terrorist financing all over the world.
On April 20, 2015, the Editor in Chief, Bloomberg, interviewed Governor Dr. Atiur Rahman. Bloomberg is very selective in interviewing personalities who has demonstrated outstanding performance not only within the country but also in an international forum.
So the Governor's interview with the Editor-in-Chief of Bloomberg has drawn special attention of the leaders of world financial market. Few months ago, Worldfolio magazine published an article with the title "The Poor Man's Governor" wherein they have profusely praised Governor Dr. Atiur Rahman's contribution towards promoting socially and environmentally responsible financing in Bangladesh.
The Times of India and Ananda Bazar Patrika have published article on "Bangladesh Success in Economic Development" in their March issues where the writer has praised the role played by Bangladesh Bank in achieving this success.
Governor Dr. Atiur Rahman's efforts in attending all international forums and portraying our country's achievement as well as potentiality have placed Bangladesh in a respectable place. Governor's dynamic role has not only rebuilt but also upheld the image of our country in the international arena.
Now financial leaders of the developed world have learned much about our country and have started taking positive approach towards exploring trading opportunities in our country. The central Bank represents country's banking sector and the government treasury as well, so when the Governor of the central bank is highly regarded, the country's whole banking system as well as the country as a whole is, of course, viewed with positive approach.
However, high impression created by the present Governor will have to be reaped by the country's commercial banks, which will have to be well-prepared to derive this benefit. Among other factors, four crucial areas, viz. Deposit Loan ratio, Non-performing Loan, Compliance and Corporate Governance will have to be addressed by the commercial banks in order to strengthen correspondent relationship with counterparty banks and thereby avail many sophisticated financial services which are cost-effective and revenue-generating as well. While evaluating the performance of counter-party bank, deposit loan ratio is viewed with serious attention and higher the ratio, better the rating.
Non-performing loan is the main impediment to projecting our bank's performance to the international banking community. In our country the percentage of non-performing loan is historically high and to speak the truth, the high rate of non-performing loan is an acute problem.
Now, time has come to take drastic decision in streamlining the non-performing loan. The loans, which became non-performing in the 80s and 90s, have been carried over in the banks' book which is a ridiculous and unacceptable approach in the accounting standard.
This longstanding non-performing loan seems to be beyond recoverable state so there is no justification of carrying over this bad loans decades after decades which eventually jeopardise the banks overall performance. So with the support and cooperation from central bank, a comprehensive plan should be undertaken with a view to getting rid of bad loan. This is a very complicated issue.
Compliance has now-a-days become a very crucial issue in maintaining correspondent relationship with counter-party banks.
In the present day's changing geopolitical situation, all banks, irrespective of their status and location, emphasises compliance. Commercial banks in our country should view this issue with serious attention. Technically compliance refers to the submission and fulfillment of paper obligation and this will not, of course, be a problem.
The directors and major shareholder of our banks are not involved with any unlawful financial activity, so timely submission of necessary paper and documents will ensure compliance.
However, providing information and documents and communicating thereafter should be done in a very professional manner which our banking sector miserably lacks. The onus of maintaining correspondent relationship lies with the international division where there is scarcity of competent personnel and as a result, banks remain in adverse situation while maintaining correspondent relationship.
Dr. Atiur Rahman has completed his six-year term as Governor of Bangladesh Bank this month and during his tenure he has played a laudable role in internationalising Bangladesh Bank.
However, commercial banks are not well-equipped to derive the benefit from this internationalisation. If appropriate measures are not taken to prepare our commercial banks, the benefit of image built in the international arena by the country's central bank will remain beyond our reach.