Directors should not interfere with the operations of banks to ensure proper management, says Bangladesh Bank Governor Abdur Rouf Talukder.
If they intervene in matters outside their purview, it will only harm the institutions, he said at the opening ceremony of the Annual Banking Conference, organised by the Bangladesh Institute of Bank Management, in Dhaka’s Mirpur on Saturday.
“The duties of bank directors and managers have been clearly defined. They should work accordingly,” Talukder said. “Directors cannot do the work of managers. And, according to the rules set by the central bank, managers will continue their duties.”
The central bank’s governor said he had explained this to bank directors and executives in talks with their respective organisations.
After his speech as chief guest at the event, Talukder took questions from the media.
In response to questions about what the central bank was doing to address Bangladesh’s economic plight, spurred by runaway inflation and strain on foreign reserves, Talukder said he expected inflation to ease within the next two to three months.
The reasons for the current situation are international in nature and it is difficult to make adjustments without unintended consequences, according to him.
“The current inflation is due to imports. We have to import oil and fertiliser. The price of oil has gone up. We are trying to buy fertiliser through alternate means. The steps the government and Bangladesh Bank have taken will lead to a better situation."
The foreign exchange crunch was also brought up in the speech given by Prof Shah Md Ahsan Habib of Bangladesh Institute of Bank Management.
“Due to global and domestic factors, inflation has put strain on the foreign exchange reserves,” he said. “If the government and Bangladesh Bank do not take the proper initiatives to resolve this current inflationary situation, the different targets set out in the budget will prove unreachable.”
The central bank governor responded that the government and Bangladesh Bank’s efforts to increase domestic supply and rein in inflation would bear fruit in the coming months.
Amid surging consumer prices, many economists have suggested removing the 9 percent cap on the lending interest rate.
“If the limit on the interest rate is removed, it will increase costs for entrepreneurs,” Talukder said. “It will also increase the costs of managing funds for banks. We want to give entrepreneurs loans at lower rates so that production costs stay low.”
Bangladesh Bank has recently asked six banks, both domestic and international, to explain why they made "excessive profits" from the overheating foreign currency market. The central bank governor said the matter is under investigation and more information would be provided once the probe was complete.
The governor stressed the importance of proper bank management at the event. Banks are not just about making profits, but must also ensure that they are run properly, or else they risk harming the entire sector, he said.
The Bangladesh Institute of Bank Management organises the annual conference and several domestic and international banks usually take part in it. In addition to sharing their experiences, they also discuss the global state of the banking sector.
The event could not be held in 2020 and 2021, so it is the first conference in three years. Bankers from India, Malaysia and Nepal have joined the two-day event.