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Muhith, Atiur crack the whip on errant state banks

The finance minister and the governor instruct directors to put public interest first

Star Business Report
Finance Minister AMA Muhith and Bangladesh Bank Governor Atiur Rahman both yesterday instructed the newly-appointed directors of the state-owned banks to put vested quarters at bay — and work for the public interest.
The instruction comes following the recent spate of accusations against the state-run banks of misappropriation of public money and financial crimes such as the Hall-Mark scam that have rocked the banking system.
The tenure of the boards of the staterun banks expired in September of last year, but the government appointed the directors only in December.
In a break from tradition, the government this time has appointed less politically connected directors.
The direction from the minister and the governor came at a special briefing for the 22 newly-appointed directors to articulate their responsibilities.
This was the first time the banking and financial institutions division of the finance ministry has organised such orientation programme for directors to help them avert such scandals.
Speaking at the daylong event, Muhith ordered the newly-appointed directors to put public interest above everything.
“Your job is to safeguard public interest. Keeping this in mind, work accordingly,” he said.
Muhith and Rahman addressed the directors in the morning, while senior officials of the central bank and the banking division briefed them on their responsibilities, duties and challenges during the three-year tenure.
The minister also said the central bank's jurisdiction over the state-owned banks is being expanded in the wake of
the Hall-Mark scandal.
The government will pass the Banking Companies Act next month, giving Bangladesh Bank more control over the state-run banks.
"Bangladesh Bank could not lay a hand on the state-run banks. Now, it controls them—in some measure."
“But the central bank has not been given the full authority. We have given as much authority as we deemed necessary,” Muhith said.
The minister also said the amended Act would give authority to the central bank to remove managing directors of the state-run banks in case of detection of any irregularity.
But the minister did not state whether the central bank would be given power to overthrow boards of the state-run banks.
“It is unlikely that the central bank would be given such power,” said an official of the finance ministry preferring not to be named.
Muhith said the directors of the staterun banks have been appointed in line with full compliance of the central bank requirements.
Unlike the private banks, the staterun banks must work for the country's best interests, Muhith added.
Rahman said a lack of internal auditing and control within the state-run banks created scope for major loan embezzlement such as Hall-Mark scam, which has gravely dented the image of the banking system.
"The central bank has brought in significant changes, both qualitative and quantitative, in monitoring of the staterun banks."
Rahman, too, hopes the new directors would be able to discount the influence of the vested quarters while evaluating credit risks and approving loans — and establish strong accountability.