Dhaka, Bangladesh
BB asks FBL board to tackle liquidity crisis

BB asks FBL board to tackle liquidity crisis

Bangladesh Bank (BB) today asked the new board of directors of the Farmers Bank Limited (FBL) to keep some money in the bank to face the existing liquidity crisis and bring back customers' confidence, reports BSS. "We have directed the members of the FBL board to keep some money from their own fund for overcoming the current liquidity crisis," BB Executive Director Subhankar Saha told the news agency. After taking charge of the new board, Chairman Mohammad Masud and members met with the BB governor and high officials at the central bank headquarters in the city. Subhankar Shah said BB also asked the FBL to take necessary steps for improving all financial indicators of the bank. He said the board members, too, expressed their strong stance to run the bank as per the BB's directions. Earlier, former home minister Dr Mohiuddin Khan Alamgir resigned as chairman of the FBL board of directors and executive committee in response to the central bank's cautions against the liquidity crisis the FBL has been facing for quite some time. Another member of the board of directors Mahabubul Haque Chisti also resigned as chairman of the FBL audit committee. According to a press release, issued by BB earlier, it was observed that the crisis was deepening, as a number of depositors were trying to withdraw money from the bank. As the matter came to the notice of Bangladesh Bank, necessary regulatory steps were taken, the release added. It also said that steps were taken against FBL's managing director for failing to fulfill his responsibilities and violating the guidelines of Bangladesh Bank. The central bank also sent a letter to FBL, asking why Managing Director AKM Shameem of the private bank would not be removed within seven days. Talking to the agency, a BB high official said BB sent a letter to FBL for giving answer within seven days. The seven days will end on next Sunday, he added. Earlier last month, the government flagged the bank as 'risky' for the financial sector of Bangladesh. Bangladesh Bank appointed an observer for the bank last year after finding irregularities in disbursing loans of billions of taka only three years into starting operations, a move halted by the High Court later. Now the finance ministry says the bank is taking loans with high interest rates from depositors and other banks while it does not have the capacity to repay. The Farmers Bank has created 'systematic risk' for Bangladesh's entire financial sector in this way, the Bank and Financial Institutions Division or BFID says in a report. The division submitted the report to the parliamentary standing committee on the finance ministry. The bank's depositors may lose confidence in it for these activities, the report warned. It said The Farmers Bank is taking new loans violating a ban by the central bank. The Farmers Bank also admitted to the irregularities, the division says in the report. The Farmers Bank secured its licence along with eight other banks in June 2013. The awarding of the licences to the banks was allegedly a politically influenced move. Ruling Awami League MP Alamgir was the chairman of the bank. His wife held the post beforehand. According to the report on Farmers Bank, it loosened rules of disbursing loans and its internal control system soon after launch in 2013. "The bank does not have the ability to repay its liabilities," the report said. It said the Farmers Bank is experiencing liquidity crisis for a year and it has deepened to such a level that the bank is failing repeatedly to fulfil cash reserve requirement or CRR at the Bangladesh Bank. The bank's cash reserve at the central bank was Tk 300 million on Sept 17. The total deposit by its customers was Tk 51.25 billion on that day. Other banks deposited Tk 5.35 billion in it and lent it Tk 1.45 billion in call money market. The bank bought government bills and bonds worth over Tk 10 billion until that day. The report said the bank is disbursing loans violating a Bangladesh Bank ban on approving new loans and raising the ceiling of loan, pushing its loan-deposit ratio to 88.7 percent. The maximum acceptable ratio is 85 percent.

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