Staff Reporter :
The Centre for Policy Dialogue (CPD) revealed at a press conference on Monday that approximately Tk 92,261 crore was embezzled in 24 major banking scams between 2008 and 2023.
This figure is equivalent to 12 percent of Bangladesh’s national budget for FY24 or 2 percent of the country’s gross domestic product (GDP) for FY23.
The data was presented by CPD Executive Director Fahmida Khatun, who was joined by CPD Research Fellow Syed Yusuf Sadat.
The think tank emphasised the urgent need for improved governance in the banking sector to address these issues.
In the press conference, CPD called for the immediate closure of the Finance Ministry’s Financial Institutions Division (FID) and an investigation into all current and former FID officials for potential wrongdoing.
CPD argued that the dual regulation of banks has led to significant vulnerabilities within the sector, including high loan defaults.
Fahmida Khatun criticised the previous government for failing to uphold its commitments to protect the banking sector, as outlined in various policy documents and election manifestos.
She highlighted that many formerly reputable banks have seen a decline in performance following hostile takeovers by crony capitalists.
The CPD report also revealed significant financial misconduct:
– Between 2007 and 2014, illicit financial outflows from Bangladesh ranged from $47 billion to $67 billion, according to the Global Financial Integrity (GFI) Report.
– From 2014 to 2016, approximately Tk 236 crore was laundered through AB Bank’s offshore banking services.
– Between 2009 and 2013, Tk 4,500 crore was embezzled from BASIC Bank through fake companies and dubious accounts.
– In 2017, a single corporation gained control over seven private commercial banks in Bangladesh, leading to a notable decline in their performance.
The report also highlighted that in 2022, S Alam Group borrowed around Tk 30,000 crore from Islami Bank Bangladesh Ltd.
The CPD expressed concern that in the last 15 years, Bangladesh Bank governors have either ignored existing rules or altered laws to benefit vested interest groups.
To remedy this, the think tank recommended that the appointment of the Bangladesh Bank governor and deputy governors should exclude current or former government officials, as stipulated in the Bangladesh Bank (Amendment) Act, 2003.
Additionally, the CPD reported that Bangladesh Bank does not effectively supervise government banks under the Financial Institutions Department.
Many banks in Bangladesh are described as ‘dying’ or ‘clinically dead’, with 11 banks failing to reserve provisions according to Basel principles.
Dr Fahmida Khatun described the current state of third and fourth-generation banks, including Islami Bank Bangladesh, which she said has deteriorated significantly since its takeover.
To address these issues, the CPD recommended the establishment of a three-month banking commission to identify and resolve problems within the banking sector.
Mostafizur Rahman, an honorary fellow of the CPD, underscored the importance of forming this commission to break the cycle of dysfunction within the banking system.
‘Forming a bank commission is crucial to breaking the vicious cycle of the banking sector. Formation of a three-month banking commission to identify and solve the banking sector’s issues’, he added.