BD may slip into 'debt crisis' shortly

[aakash_2410]

Nationalized Banks, or in other words State owned commercial enterprises DID NOT exist prior to 1971.All private sectors Industries and Commercial organisations were NATIONILIZED, post 1971, during the one party BAKSAL regime, in line with the post USSR socialist era pattern. Could you kindly state the name one bank in the U.K, where you claim to reside, that is State owned?

Quite a few big banks are state owned in the UK.

Lloyd's, Royal Bank of Scotland, Nationwide - 100% State owned.
Barclays, HSBC - partially state owned.

 

[Zabaniyah]

Well, he's right about the employment situation. It is more difficult for fresh graduates to find jobs compared to let's say 5 years ago. I've even seen seasoned professionals unable to switch to another job in this situation. Lack of investment is one reason.

Now regarding debt, I would agree to an extent that there is a lack of clarity regarding how those funds are utilized. But we need more info on that.

As for foreign exchange reserves, I wouldn't worry too much about them. As per central bank guideline, any deffered trade transaction (both buyer's and supplier's credit) worth over USD 1,000,000 (or any currency equivalent) or any transaction that is equal to 360 days tenor would require part-by-part payment instead of payment of one full amount once maturity is due. This policy was designed to ease pressure on our FOREX reserves, and our foreign suppliers would be happy to get their payment early as it would improve their cash flow. I think we should be safe on this one.

As for banks, there are way too many private banks. We need seriously reduce the number of them through mergers, the reduce the number non-performing loans. A lot of these banks also happen to be very poorly run. As far as state-owned banks are concerned, it would be more rational to form one big and well run state-owned bank instead of having multiple ones. Another thing I mentioned earlier is that many of these state-owned banks have a specialty for restructuring these NPL's. How they do this is largely unknown. And that is where much of the risk would stem from as far as debt is concerned. And another thing, this trend of having banks for civil services, paramilitary and other interest groups needs to stop. Shimanto Bank (for BGB) is one such example. There is now news of a bank for the police. This needs to stop.

 

[EastBengalPro]

Well, he's right about the employment situation. It is more difficult for fresh graduates to find jobs compared to let's say 5 years ago. I've even seen seasoned professionals unable to switch to another job in this situation. Lack of investment is one reason.

Now regarding debt, I would agree to an extent that there is a lack of clarity regarding how those funds are utilized. But we need more info on that.

As for foreign exchange reserves, I wouldn't worry too much about them. As per central bank guideline, any deffered trade transaction (both buyer's and supplier's credit) worth over USD 1,000,000 (or any currency equivalent) or any transaction that is equal to 360 days tenor would require part-by-part payment instead of payment of one full amount once maturity is due. This policy was designed to ease pressure on our FOREX reserves, and our foreign suppliers would be happy to get their payment early as it would improve their cash flow. I think we should be safe on this one.

As for banks, there are way too many private banks. We need seriously reduce the number of them through mergers, the reduce the number non-performing loans. A lot of these banks also happen to be very poorly run. As far as state-owned banks are concerned, it would be more rational to form one big and well run state-owned bank instead of having multiple ones. Another thing I mentioned earlier is that many of these state-owned banks have a specialty for restructuring these NPL's. How they do this is largely unknown. And that is where much of the risk would stem from as far as debt is concerned. And another thing, this trend of having banks for civil services, paramilitary and other interest groups needs to stop. Shimanto Bank (for BGB) is one such example. There is now news of a bank for the police. This needs to stop.

Sensible post!

 

[Mage]

Well, he's right about the employment situation. It is more difficult for fresh graduates to find jobs compared to let's say 5 years ago. I've even seen seasoned professionals unable to switch to another job in this situation. Lack of investment is one reason.

Now regarding debt, I would agree to an extent that there is a lack of clarity regarding how those funds are utilized. But we need more info on that.

As for foreign exchange reserves, I wouldn't worry too much about them. As per central bank guideline, any deffered trade transaction (both buyer's and supplier's credit) worth over USD 1,000,000 (or any currency equivalent) or any transaction that is equal to 360 days tenor would require part-by-part payment instead of payment of one full amount once maturity is due. This policy was designed to ease pressure on our FOREX reserves, and our foreign suppliers would be happy to get their payment early as it would improve their cash flow. I think we should be safe on this one.

As for banks, there are way too many private banks. We need seriously reduce the number of them through mergers, the reduce the number non-performing loans. A lot of these banks also happen to be very poorly run. As far as state-owned banks are concerned, it would be more rational to form one big and well run state-owned bank instead of having multiple ones. Another thing I mentioned earlier is that many of these state-owned banks have a specialty for restructuring these NPL's. How they do this is largely unknown. And that is where much of the risk would stem from as far as debt is concerned. And another thing, this trend of having banks for civil services, paramilitary and other interest groups needs to stop. Shimanto Bank (for BGB) is one such example. There is now news of a bank for the police. This needs to stop.

Do we have any incident of bigger bank buying smaller banks? I once talked with someone(a relative of mine who was a DMD of a bank) about it and he said it wouldn't be feasible for bigger banks to buy smaller banks. Besides I've heard bank owners gain a lot of money by releasing share in the share market. So if one has enough money then opening a bank is a profitable venture.

 

[Bilal9]

Got ourselves entangled in the crisis in the Banking sector, instead.
Carry on good countrymen, hold your heads high and keep all threads alive and knowledgeable. Eid Mubarak in advance and keep well. Salam.

Hear hear!

Eid Mubarak to all PDF Members in advance.

 

[Zabaniyah]

Do we have any incident of bigger bank buying smaller banks? I once talked with someone(a relative of mine who was a DMD of a bank) about it and he said it wouldn't be feasible for bigger banks to buy smaller banks. Besides I've heard bank owners gain a lot of money by releasing share in the share market. So if one has enough money then opening a bank is a profitable venture.

Bank Asia had taken over Scotia Bank, and Muslim Commercial Bank. Standard Chartered took over ANZ Grindlays and American Express Bank. Commercial Bank of Ceylon took over Indosuez (it was a French bank). So, it is not entirely new. These were many years ago though.

An ex-MD whom I know have said that there will be mergers and takeovers among banks 5-10 years ahead. He said this way back in 2013. We don't see any steam though. The DMD maybe right about it not being feasible. No bank would want to run more branches, more staff, and you have to train them. And that equates to more costs. There will be vested interests too.

The thing about these local private commercial banks is that they are owned by families. They generate business from family members, relatives and friends. Banks like Standard Chartered and HSBC attract business just through their names. Notice that the take overs I have mentioned before were all foreign with the exception of Bank Asia (which consequently took over two foreign banks). So, I think we get the picture here. Those 4th generation banks are all political banks, and nothing more.

This is not to say that all PCB's are bad. EBL, MTBL, Brac, City, BA among a handful of others are going into a sound direction.

 

[wiseone2]

Hate to disagree, to your remarks, why should such "High Risks" ventures be entertained in the first place? Please answer in pure economical terms not emotional jargon's.

What is definition of high risk ?

In 1995 I come to you with a proposal to setup a website to catalog all things related to Bangladesh. I tell you the website is free and will make money out of ads. Which bank will finance the proposal ?