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Overseas branches, exchange houses and other subsidiaries of local banks are shutting down one after another because of financial losses and rampant irregularities. The latest example is Sonali Bank (UK) Ltd, an overseas branch of Sonali Bank that closed its operations on August 16.
This branch – established in 2001 by the state-run bank – faces severe corruption and money laundering activities, said industry insiders, adding that the Bangladesh government had provided support to the Sonali Bank (UK) from the foreign exchange reserves.
Janata, another state-run bank, closed operations of its subsidiary Janata Exchange Company INC (JECI), USA in November last year. Authorities had found financial discrepancies of around $603,947 (approximately Tk 5.13 crore) in the company in February 2020.
Janata Bank suspects that Sushmita Tabassum, a telephone operator and teller at the JECI, was involved in the irregularities. Janata bank officials now claim that Sushmita is on the run from the law.
Speaking to The Business Post, Janata Bank Chairman SM Mahfuzur Rahman said, “We shut down the subsidiary’s operations because the US Federal Bureau of Investigation (FBI) instructed us to do so, due to the irregularities of one of the JECI employees.”
These two incidents are not isolated, because Agrani Bank, National Bank, Exim Bank, Pubali Bank, Prime Bank, AB Bank and Mutual Trust Bank have also shut down their overseas branches and exchange houses in multiple countries in the last few years.
Most of these overseas branches and exchange houses were not very active and profitable, said a senior official of the central bank on condition of anonymity. He then pointed out that the subsidiaries were launched without any business feasibility surveys.
The Bangladesh Bank says it does have detailed information regarding the overseas branches, exchange houses and subsidiaries that had shut down in recent years, especially about their income and expenses.
On the issue, central bank Executive Director and spokesperson Md Serajul Islam said, “The central bank had shut down some exchange houses and subsidiaries, and some forced to cease operations to comply with the regulations of respective countries.
“Most of the subsidiaries incurred losses for several years.”
The National Bank closed its exchange house in the USA in February this year. The bank’s managing director Md Mehmood Husain said, “The exchange house has been incurring losses for several years, and that is why we shut it down.
“Not only National Bank, but most of the subsidiaries of other banks are incurring losses too due to a lack of in-depth planning. However, we have exchange houses in Malaysia, Singapore, Greece and Maldives, and those are profitable.”
Agrani Bank and Exim Bank had closed their exchange houses in Canada last year.
A look at banks’ overseas operations
Until June this year, 20 state-run and private commercial banks had overseas branches, exchange houses, and other subsidiaries in 22 countries across the world.
State-run Sonali Bank has two branches in India, and three representative offices in Kuwait and Saudi Arabia. Janata Bank has two exchange houses in Italy and four branches in the UAE.
Rupali Bank has purchased shares of a bank in Pakistan. Agrani Bank has six exchange houses in Malaysia and four in Singapore.
Private commercial Bank Asia has two exchange houses in the UK and USA, Brac Bank has four exchange houses in the UK, France, Portugal and Italy, National Bank has nine exchange houses in Malaysia, two in Greece and Maldives and three exchange houses in Singapore.
Prime Bank has six exchange houses in Singapore and the UK and one subsidiary company in Hong Kong, while Standard Bank has seven exchange houses in the USA and one in the UK.
Exim Bank has one exchange house in the UK and one subsidiary in Hong Kong, Eastern Bank has two representative offices in Myanmar and China, and one finance company in Hong Kong.
Besides, South East Bank, IFIC bank, AB bank, Mercantile Bank, City bank, Social Islami Bank, Islami Bank and UCBL have exchange houses abroad.
What is behind the decline?
Industry insiders say the lack of in-depth survey, high operating costs, competing against hundi and inadequate technological investment are the key reasons behind dwindling number of local banks’ overseas exchange houses.
National Bank Managing Director Md Mehmood Husain said, “Most of the banks opened overseas branches and exchange houses in western countries on emotion, instead of running surveys to check the feasibility of such a move.
“The lack of in-depth survey, proper planning, and having no idea about the coverage area are key reasons behind these subsidiaries shutting down.”
He added, “The overseas branches and exchange houses also needed big investments in technology to carry out business, but most the banks did not make adequate investments in this field.”
Senior banker and former chairman of the Association of Bankers, Bangladesh (ABB) Mohammed Nurul Amin said, “Almost all the overseas branches and exchange houses are incurring loss because their expenses far exceed their income.
