Central bank needs full autonomy for preventing financial scam

DHAKA, APR 27: Speakers at a roundtable discussion demanded full autonomy of the central bank to prevent Hall mark type scam in the future. “A fully autonomous regulator that can hire quality staff it needs, procure the technology it requires to strengthen its effectiveness and implement prudent norms without the fear of political influence is essential to prevent the Hallmark type scams in future,” said Sadiq Ahmed in a keynote paper presented at the discussion. The speakers pointed out that the weakly performing public banks with a huge amount of infected portfolio are a serious threat to the soundness of the banking sector.

The policy research institute (PRI) organised the roundtable discussion on the occasion of releasing its fourth quarterly policy brief on Bangladesh economy at its office in the city. 

Three keynote papers were presented at the roundtable by Ahsan H Mansur and Sadiq Ahmed on banking sector and stock markets related issues.   

Prominent economists Prof Rehman Sobhan, Dr Mashiur Rahman, Dr Salehuddin Ahmed Dr Mustafa K Mujeri, Dr Hasan Zaman Dr Ahsan H Mansur took part in the discussion.

Referring to the mismatch between bank deposit and investment in share market, Rehman Sobhan observed that there was a structural change in financial sector of the country. He  said savers seem to be interested in depositing their money in banks instead of going for investing in the capital market. “As a result, we are facing some structural crisis”.  

He termed the capital market as like a casino where speculation runs very fast. 

Former Bangladesh bank governor Dr Salehuddin Ahmed pointed out that there was no dearth of policy and regulations in the country but the main problem is the implementation of those regulations.

Referring to the Hallmark scam, Ahmed pointed out that it happened because the whole system was in cracks. 

It is a red signal for the future of banking system in the country, he observed.

According to him there was no visual and rapid action by the Bangladesh bank to prevent the Hallmark scam.

Mustafa K Mujeri said the banking sector in the country made tremendous progress over the years. He, however, pointed out that lack of ethics in the banking sector can be dangerous in future.        

Sadiq Ahmed in his paper pointed out that an autonomous central bank is necessary to conduct sound monetary policy management and to exercise utmost prudence in such matters as the licensing of new banks and the use of directed credits.

“Recent experience with government interventions in these matters is illustrative of the critical importance of establishing an autonomous central bank in Bangladesh.”     

He also suggested the government rethink the strategy for the supervision of public banks. Ahsan H Mansur in his keynote paper said the government should stop the annual ritual of allowing black money into the stock market. “Stock market should not be painted as the playground for legalizing illegally obtained money.” 

He pointed out that a comprehensive review of the stock market is long overdue. At the moment, the tax regime is full of inconsistencies due to ad hoc measures and not in line with international best practices.  Mansur suggested that the government should issue treasury bills and bonds at market rates and thereby develop a liquidity bond market. 

He emphasised on complete demutualization of stock exchanges to segregate ownership management and trading rights of members and convert the two exchanges into commercially and professionally run organisations. He also suggested upgradation of accounting and auditing standards to enhance confidence of the people to capital market.