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Misuse of political power renders BB toothless: survey

Star Business Report
Misuse of political power in banking business results in Bangladesh Bank (BB) facing impediments in taking decisions independently along with punitive measures against large scams, says a survey.
In a few cases, the central bank could not immediately take punitive measures for the sake of national interest, says the survey report titled "Internal Control and Compliance of Banks” conducted by the Bangladesh Insitute of Bank Management (BIBM).
Professor Md Mohiuddin Siddique, a director of the BIBM, presented the study at a workshop held at the BIBM auditorim in the capital yesterday.
The report observed that there was a common perception that the BB fails to respond to large scams due to a lack of farsightedness.
"It cannot be denied that BB is not independent to take decision at all times," the report stated.
BB executives who were surveyed opined that political power should not be misused for operating a banking business.
Owners of the banks should consider banking as a specialised industry where any misdeed will harm them and the economy as a whole, said the report.
The government should not allow any misconduct from anyone for the sake of its own image. The BB will have to take harsh action against parties involved with irregularities, it recommended.
Failure of a bank, unlike other industries, is contagious and may lead to crisis in the entire banking industry.
In a bank-based economy like that of Bangladesh, any largescale shock in the financial sector hits the real sector and inflicts a huge burden on the society.
So, the regulators should detect any major event of fraudulent practice or financial crime at an early stage and impose severe punishment on the persons responsible, accordingto the survey report.
A strong internal control system is a must for a sustainable banking business, Abu Hena Mohd Razee Hassan, deputy governor of Bangladesh Bank, said while addressing the event as chief guest
Bangladesh Bank is improving its monitoring system to rein in the irregularities in the banking sector, he said. A bank's operational activities depend on the right direction of senior management and the board, said Mehmood Husain, managingdirector ofNRB Bank.
He said banks should come out from short-term profit targets to bring discipline in the sector.
The study revealed that banks generally set their profit target without any underlying objective and quantitative analysis. So, the attention of the top management remains disproportionately focused on achieving the quantitative target rather than ensuring quality of operations and adherence to sound banking practices.
As a result, asset quality of the bank deteriorates, causing non-performing loans to creep up, according