It will not be right to force a weak bank to merge with a strong bank, because the stronger bank will have to shoulder the losses accumulated by the weaker bank, and this could create new problems in the country’s financial sector, economists say.
The Bangladesh Bank should find out why the banks need to merge, and then take proper initiative based on their findings.
.png)
Former caretaker government advisor and eminent economist Wahiduddin Mahmud and former governor Salahuddin Ahmed made these remarks at the unveiling ceremony of the 5th edition of “Banking Almanac,” a data-based research book on banks and financial institutions.
The unveiling programme was held at the National Press Club on Saturday in collaboration with Shikkha Bichitra, which is supported by the central bank.
Addressing the event, Wahiduddin Mahmud said, “There is talk of merging weaker banks. If it is done by force, the burden of losses will fall onto the shoulders of stronger banks. But we have been saying there is no need for so many banks in the country.
“So why do we need mergers? The central bank should find out the reasons for any merger.”
Meanwhile, Salahuddin Ahmed said, “It would be difficult to force a big bank to merge with a weaker and smaller one. How would a big bank absorb a polluted balance sheet?
“However, if a small bank is merged with a big bank, then for the bigger bank should have an opportunity to buy the shares of the smaller bank at a lower price.”
Expressing disappointment with the country's banking sector, both economists said that the country’s banking sector is now moving in the opposite direction. Although there are good laws, regulations, norms, but there is a lack of enforcement.
Wahiduddin Mahmud said, “Three decades ago, all norms of international standards were enacted to strengthen the country’s banking sector. But now, all those regulations are being talked about again.
“The Bangladesh Bank is now making a road map yet again. However, if we do not take the initiative to find out why we fell off the previous road map, the new one will not be useful.”
The former banking reform committee head added, “We are yet to adopt the antitrust policy in the financial sector, and many banks are still controlled by a family or a business group. The central bank should not repeat the same mistakes made in the past.
“Banks are now walking in the reverse, and ongoing reforms are very strange. For example, a defaulter can now erase his/her name by paying only 2 per cent down payment of their total loan. This amount was previously 10 per cent for first time rescheduling, 20 per cent for second time and 30 per cent for the third time.”
Wahiduddin continued, “A total 61 banks have been approved. If the new bank does not bring innovative products then there is no need. The norms of the banking sector of Bangladesh are of international standards, but they are not being followed properly.”
Former chairman of Association of Bankers, Bangladesh (ABB) and Chairman of Fas Finance Mohammed Nurul Amin gave a welcome speech in the book unveiling programme, while Exim Bank Additional Managing Director Shah Abdul Bari spoke on the occasion among others.
The ceremony was hosted by Salahuddin Bablu, vice president of the Economic Reporters’ Forum (ERF).
