New law drafted allowing cenbank to apply mergers, acquisitions, liquidation of crisis-ridden banks: Governor

A new law titled "Bank Resolution Act" is in the offing to allow the Bangladesh Bank to legally apply corrective measures like mergers and acquisitions, liquidation, re-capitalisation and consolidation of the crisis-ridden banks.

 "We've already completed the draft of the new law. The World Bank and the International Monetary Fund have already reviewed it. We're now reviewing it through an international expert consultant. After getting their opinions, we'll turn it into a law," said BB Governor Dr Ahsan H Mansur.

During an interview with BSS at the central bank head office, Mansur focused on the pros and cons of the new law, saying, "It would be possible to make quick policy decisions for merger, acquisitions, liquidation or re-capitalisation of any bank under the law."  

"All necessary efforts are being made to stabilise the country's banking sector. We've formed a task force to bring reforms to the reeling banking sector. We're also providing liquidity support to the crisis-hit banks. We're formulating the new law to legally apply corrective options," he added.

Responding to a question on the concerns of common people, he asserted that there is no chance of a meltdown in the banking industry as the central bank has already taken remedial package measures to stabilise the distressed commercial banks.

"There are some banks reeling from a serious liquidity crunch following massive-scale loan-related irregularities during ousted Prime Minister Sheikh Hasina's regime, but they are overcoming the crisis through different policy measures of the central bank," he added.

With the direct patronage from the high-ups of the ousted Awami League government, Dr Mansur said that a few families looted at least Taka 2,50,000 crore from the country's banking sector and subsequently some 10 to 11 banks became financially vulnerable.

The banks are thus failing to pay back money to the depositors, which has created commotion among the bank customers, he added.

"After taking power, we've been able to halt such offences in the banking sector. Now, we're trying to recover the money. From their (loan scammers and money launderers) assets situated in the country, we'll be able to recover only 10 to 20%," he said.

Mansur also hoped that Bangladesh's banking sector is expected to become stable within the next two to three years.

Citing an example of the gross irregularities that happened at Islami Bank, he said one family holds around 80% shares of the country's largest unconventional bank and they left the country.

About bringing back the laundered money from abroad, Mansur said they are communicating with different parties including the US Department of the Treasury, the US justice department and the Intelligence and Security Committee of the British government.

"We're communicating with different parties to bring back the laundered money. They've already assured Bangladesh of providing support to repatriate the stolen money," he added.

Regarding the reform initiatives of the banking sector, Mansur said that the central bank has dissolved the boards of 12 banks to curtail the influence of the (sponsor shareholder) families and ensure stability in the banking sector.

He said a task force is working on assessing the quality of assets of weak banks to know the overall situation of the sector.

"We're using international firms, like Deloitte, for Assets Quality Review (AQR) of the crisis-hit banks. The World Bank (WB), the Asian Development Bank (ADB) and the International Monetary Fund (IMF) will support us to this end," he added.

The governor said the firms would assess loans and thus give suggestions on which loans are recoverable and which ones are not.

As per the suggestions, he said, the BB would make necessary decisions for providing support to the crisis-hit banks.