Cenbank raises alarm over Sonali’s UK subsidiary chairman’s tenure after retirement

The Bangladesh Bank has raised concerns regarding the long-standing tenure of former government secretary Asadul Islam as chairman of Sonali Bangladesh (UK) Limited, a foreign subsidiary of Sonali Bank. 

This appointment appears to be in direct contravention of a 2017 circular issued by the finance ministry.

Asadul, who retired as a senior secretary on 27 August 2021 as per his contract, has continued to hold the position despite the ministry's clear instructions. The Bangladesh Bank recently sent a letter to the senior secretary of the Financial Institutions Division (BFID) within the finance ministry, expressing its concern and urging for immediate action.

According to the 2017 circular, government employees are eligible to serve as directors of state-owned commercial and specialised banks' subsidiary companies. However, the circular explicitly states that the position becomes "immediately vacant" upon their retirement, and a new appointment must be made.

Mohammed Muslim Chowdhury, current chairman of Sonali Bank, confirmed the violation. "There has been a legal deviation in Asadul's chairmanship of Sonali Bangladesh (UK) Limited, according to the finance ministry's circular," he told TBS. "The Bangladesh Bank has sent a letter, so now the matter is with the Financial Institutions Division of the finance ministry."

Licence revoked in 2022

Officials familiar with the matter told TBS that the UK-based subsidiary, formerly known as Sonali Bank (UK) Limited, had its licence revoked by the country's regulatory body on 16 August 2022 due to long-term losses and various irregularities. On the same day, the company was restructured and a new entity, Sonali Bangladesh (UK) Limited, was formed. It is registered with Companies House in the UK as a Financial Institution and Trade Entity with a paid-up capital of £61.46 million (equivalent to over Tk1,000 crore at current price)

Its primary activities include providing LC bill advice, negotiation, confirmation and discount facilities for Sonali Bank PLC and other Bangladeshi banks. It also facilitates foreign remittances for expatriate Bangladeshis in the UK.

Challenges in UK remittance market

While remittance flows to Bangladesh from the UK and the US have increased in recent years, Bangladeshi banks operating money exchange businesses in the UK are facing significant losses. Since 2010, over a dozen banks have attempted to open money exchange houses in the UK, but six, including Prime Bank, Pubali Bank, AB Bank, BRAC Bank, and Mutual Trust Bank, have since closed their branches.

Currently, seven exchange houses, operated by Sonali Bank, Bank Asia, BRAC Bank, Standard Bank, Exim Bank, IFIK Bank, and Mercantile Bank, are still in operation, though most are running at a continuous loss, according to sources within the banking sector.