Dhaka, Bangladesh (BBN) – Most of Bangladeshi banks have faced adverse impacts of ‘de-risking’ as the global banks cut corresponding relationships with them.
“Nine local banks have been seriously affected by de-risking,” Abu Hena Mohammad Razee Hassan, Deputy Governor of Bangladesh Bank (BB), disclosed on Wednesday while replying to a query about the impact on de-risking of Bangladesh.
He also said some other local banks have also been affected by the de-risking.
The term ‘de-risking’ refers to financial institutions closing the accounts of clients perceived high risk for money laundering-or terrorist-financing abuses, namely money service businesses, nonprofit organisations, correspondent banks, and foreign embassies.
Among the nine local banks, five are state-owned commercial banks out of eight while one is a Shariah-based Islamic bank and three other conventional local private commercial banks.
They have been designated as the mostly affected banks of Bangladesh, a BB senior official told BBN in Dhaka.
He also said some corresponding relationships had been discontinued on the basis of media reports.
Currently, 49 local banks out of 58 are running their operations across the country.
However, the BB has already advised the global banks through their local offices or representatives to inform the Bangladesh Financial Intelligence Unit (BFIU) before cutting ties with local commercial banks, Mr. Razee Hassan, also head of the BFIU, told reporters.
Adverse impacts of de-risking increased further in 2016, affecting 60 per cent local banks as against 53 per cent a year before. It was 60 per cent in 2014, according to a study conducted by the Bangladesh Institute of Bank Management (BIBM).
“Workers’ remittance inflows are suffering downturn not just because of weakened demand for migrant workers in major migrant labour-hosting countries but also because it is getting harder, even impossible in some instances, for migrant workers to access legitimate channels for sending money home, with high-cost burdens of compliance with unduly stringent AML/CFT regulations dissuading international banks from relationships with remittance-handlers,” the central bank said in its latest monetary policy statement (MPS), released on Wednesday.
It also said: “Urged repeatedly in global dialogues, inter alia by the BB and other Bangladesh authorities, global AML/CFT standard-setters are now reportedly looking into this.”