The majority of bankers think lack of corporate ethics and exemplary punishment is the key cause of the increase of financial crimes in the country’s banking sector, according to a survey conducted by the Bangladesh Institute of Bank Management.
Taking opinions from officials of 20 banks and consulting 49 bank annual reports, the survey found that 73 per cent of bank employees felt financial crimes increased due to lack of corporate ethics while 58 per cent blamed the absence of exemplary punishment for the crime rise.
Fifty-three per cent of the bank employees think the financial crimes rose due to lack of awareness about the wrongdoings, 50 per cent blame lack of motivation, while 27 per cent say poor compensation of employees is the reason.
The report was released at a workshop on ‘Corporate ethics and financial crime in banks of Bangladesh’ held at the BIBM on Thursday.
Although a large sum of money is wasted through willful defaults, the report said, willful defaults are not recognized as financial crimes as they are not generally maintained and reported.
According to the BIBM survey, 65 per cent of banks responded that they faced one or more financial incidents in their banks during 2014-2016, while the number of credit card-related frauds increased remarkably during 2016-17.
Financial crimes include, among others, loan-, deposit- and cheque-related frauds, creating loan in the name of non-existent borrowers, fund diversion, collateral valuation, directed lending, fake title deed and change in loan limit and expiry date.
Bangladesh Bank deputy governor Abu Hena Mohd Razee Hassan, who was present at the workshop as chief guest, said banks operate public money and when a bank faces liquidity crisis due to scams, it affects the confidence of the depositors.
Mentioning that a severe liquidity crisis at a bank recently failed the bank to honour depositors to withdraw their money, he said that the situation was a threat to the bank’s existence.
Pointing out over-invoicing of capital machinery as a major threat of money laundering, the deputy governor said lack of corporate governance surely devastates a bank within a short period of time.
According to BB data, the FICSD, central bank’s vigilance and anti-fraud division, carried out 72 special inspections to private commercial banks out of which 19 inspections were to Farmers Bank in 2015-16.
Former Prime Bank managing director Ahmed Kamal Khan Chowdhury said the existence of operational irregularities and women harassment in banks plays a key role in having unethical practices there.
Calling it high time to stop unethical practices, he said that a centralized banking system might be introduced alongside branch-based banking to reduce loan-related authorization disputes.
Former Meghna Bank MD Mohammad Nurul Amin said today business interest groups seems to be even stronger than political groups and that the wastage of 10 per cent of wealth due to loan defaults is a concern for the fading image crisis of the banks.
Former BB executive director Yasin Ali said willful defaulters are equally liable as bank robbers and that ethics is more important in the banking sector because business is done here with public money.
Despite concerns over unskilled bankers, three to four banks are sacking skilled mid-level employees and bringing inexperienced individuals from other industries, which is a matter of deep concern and requires the central bank’s interference, he added.
Former Pubali Bank MD Helal Ahmed Chowdhury said employees need to study the banking rules and guidelines properly before taking diverse responsibilities.
Data integrity is a concern in the banking sector, absence of which leads to producing junks under the carpet, he added.
BIBM director general Toufic Ahmad Choudhury said bank board exists to formulate policies and it is the duty of the management to sanction loans, but frustratingly bank board sanctions loans in the country.
Still corporate culture is a long way to be established in the country and corporate governance should include all the stakeholders including the board members, he added.
He said the BB should ensure that board members must be aware of banking rules and guidelines.