Make loan defaulters’ list public

CFA Society Bangladesh, a platform of chartered financial analysts of the investment and fund management industry, yesterday urged the interim government to make the list of loan defaulters public to enhance transparency and limit their access to state services.
The call came at an event organised by the society at the Economic Reporters’ Forum in Dhaka to present policy recommendations focusing on three key areas — the economy, capital markets and the banking sector.
The loan defaulter list should be publicly available considering its social impact, said Asif Khan, president of the society and chairman of EDGE Asset Management.
At least the names of wilful defaulters should be publicly announced and Bangladesh Bank can conduct an analysis to differentiate delinquents from victims of economic downturns, he said.
“Loan defaulters should face the music, at least by limiting their access to all state services,” he added.
To better manage high amounts of non-performing loans, the central bank should review loan classification, provisioning and rescheduling policies for banks and finance companies and revise them in tune with international best practices, said Khan.
“Develop a regulatory reporting structure for deriving the actual classified and defaulted loan situation and reporting capital adequacy metrics using the true numbers,” he said.
Bangladesh Bank should withdraw the relaxed down payment facility for rescheduled loans and be stricter to prevent further deterioration of the quality of bank assets, he said.
Khan also recommended establishing an asset management company with additional legal powers to manage and resolve bad loans within a time-bound framework.
Ideally, the company should be formed through a public-private partnership (PPP) and by including firms with international experience in dealing with toxic assets, he said.
He also recommended opening more banking courts to expedite case disposals and encouraged out-of-court settlements, including alternative dispute resolution and arbitration.
Khan added that Bangladesh needs international standard rules and regulations in the banking sector and stock market to improve the situation of the financial sector.
“If anyone misuses the system, it does not mean that the system is faulty. In this case, the regulators should take care of it and punish them, but the system should not be changed,” he said.
The central bank should be provided full autonomy, free from any influence from the Ministry of Finance, CFA Society Bangladesh said in a paper, adding the governor’s appointment should be processed through the Cabinet Division.
In reforming governance in the banking sector, it recommended increasing the number of independent directors to at least five and including depositors’ representatives on the board.
“Limit family representation on the board to a maximum of one director from each family,” it said.
The government should review corporate governance policies and regulations for banks and finance companies and align them with international standards of the Basel Committee on Banking Supervision and relevant World Bank and International Monetary Fund recommendations, it said.
It also asked to ensure that banks fully comply with International Financial Reporting Standards, regulatory disclosure requests and the International Federation of Accountants code of ethics.
The Financial Reporting Council should play a stronger role in disciplining auditors, it said.
Bangladesh’s stock market is still very small when it comes to financing compared to the size of the country’s GDP, said Kazi Monirul Islam, CEO of Shanta Asset Management.
He advised amending the initial public offering valuation method to attract good companies and to ensure floor prices are never imposed and corporate disclosures are made timely.
He also said the interim government should review margin loan rules and improve governance.
Md Moniruzzaman, managing director of Prime Bank Securities, Minhaz Zia, chairman of North Star Investments, Iqbal Hossain, chief financial officer of Sonali Bank PLC, and Mahtab Osmani, executive director of Standard Chartered Bank, also spoke at the event.