Bangladesh Bank Governor Ahsan H Mansur has announced that underperforming Islamic Shariah-based banks will be merged with stronger institutions that have functional boards and no governing issues.
Speaking at the 10th Annual Banking Conference on Wednesday, Mansur said the bigger Islamic banks had been “reshaped” but a bunch of smaller banks were still grappling with issues, reports bdnews24.com.
“The banks plagued with problems will be merged. We don’t have a proper regulatory framework for Islamic banks. We’re looking at global models on how Islamic banks operate,” he said.
Mansur said, “We’re reviewing every weak bank for a merger. If a bank`s board is not functioning, the central bank has the right to intervene on behalf of depositors.”
Describing the move as an “ongoing process”, he said: “The bank reforms are not complete. We’ve already established boards at 11 banks in the first round. Several weeks ago, we created boards for two other banks.”
According to Mansur, a bank has already brought changes to their procedural rules due to the central bank’s pressure.
Bangladesh Bank has been “loud and clear” about the need to conduct banking activities within regulatory frameworks, he said.
The central bank was working to prevent people from “illegally transferring money to another country safely and disappearing”, he said.
“We want to reinforce the banking system in Bangladesh.”
On reforms, he said: “The Bank Company Act is being revised. This will bring about significant changes in the governance of banks. Also, measures are being taken to ensure that the bank boards conduct activities properly.
“This will ensure that the board operates in line with the law and sets rules to assess qualifications needed to become a board member.”
He said that the updated Bank Company Act would stipulate how many independent directors can be appointed to a board and the requisite qualifications in keeping with international standards.
Mansur also brought up issues facing the central bank. “We are working on it. The central bank has gone through different types of interventions. So, the central bank is being strengthened.”
Bangladesh Bank will not interfere with the day-to-day operations of banks but will “monitor” all banking activities, he added.
He also spoke about “strengthening” agent banking.
“Women must have 50 percent representation in agent banking. We’re working on delivering digital banking licences again. They have to focus on providing small loans. Even after appointing a new administrator, a record amount of transactions took place through Nagad last month.”
Mansur also said mobile financial services, which in his words are a “success story”, transmit Tk 50 billion daily. The goal, he said, is to raise that to Tk 60 billion.
