Dhaka, Bangladesh (BBN)- Bankers, experts and academics have suggested to introduce an effective risk-based supervision to check irregularities through improving performance and ensuring sustainability of the country’s banking sector.
The suggestions came at an annual banking conference-2012, organised by the Bangladesh Institute of Bank Management (BIBM), at its office in the capital Dhaka on Sunday.
“Some of the problems were historically inherited; some may be attributed to failure of internal governance while still others may be termed a trickle-down effect of the global financial crisis,” Bangladesh Bank (BB) Governor Atiur Rahman said while speaking at the inaugural session of the two-day-long conference.
He also said the sector has matured and achieved much. “But it has also passed through difficult times.”
The central bank chief also said: “We’ve also been improving the quality of supervision. New architecture of integrated supervision making best use of available human resources and IT infrastructure introduced in banking sector to cope with still existent irregularities and lapses will hopefully go a long way in plugging the holes.”
The central bank does not have enough supervisory grips over the state owned commercial banks (SCBs), the experts, bankers and academics said, adding that it’s a grey area in the existing system and one of the major obstacles to ensuring proper functioning of the SCBs.
They also said the way fund misappropriation took place in recent times in the banking sector rests upon a comprehensive and risk focused internal control and internal audit in the banks, sufficient autonomy of the central bank, zero tolerance by the government and the BB against any major violations of the banking norms.
Mentioning different initiatives, the governor said the central bank has appointed an expert as consultant to strengthen the skill of the BB’s inspection and supervision departments in identifying and preventing the trend of fraud/misconduct in the banks.
Regarding recent irregularities in the banking sector, Toufic Ahmed Choudhury, director general of the BIBM, said the frequency and magnitude of such fraudulent activities inflicted huge burden on the banking sector and has impacted the public confidence and reputation of the banking sector-a sector which has shown significant growth, strength and discipline for a long time.
“The occurrence of fund embezzlement also raised serious doubt in the minds of the depositors, regulators and other stakeholders of the banking sector about the financial discipline and operational standards,” he noted.
He also said it is generally recognized that such types of unscrupulous activity can’t take place without the active collaboration or passive approval of the concerned bankers. “Practically, the incidents reflect the importance as well as failure of internal control mechanism of banks.”
BBN/SSR/AD-24Dec12-10:27 am (BST)
