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Banks’ sustainable growth depends on ethics: BB governor

  • Staff Correspondent
  • 1 March, 2022 12:00 AM
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Banks’ sustainable growth depends on ethics: BB governor
Bangladesh Bank Governor and Chairman of BIBM Governing Board Fazle Kabir presides over a programme on ‘Twentieth Nurul Matin Memorial Lecture on Ethics in Banking’ at BIBM office in the capital on Monday.

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Banking sector’s sustainable growth hinges on ethical banking practices to ensure corporate governance in the sector, Bangladesh Bank Governor Dr Fazle Kabir said on Monday.

“The ethics and governance in banks are of particular importance given their critical role in the financial system. The impact of failure in banking can have immense costs,” he said.

He was speaking at the 20th Nurul Matin Memorial Lecture on Ethics in Banking held at Bangladesh Institute of Bank Management (BIBM) auditorium.

As Banks are the trustees of the depositors’ money which are invested to generate profit, the banks should run their businesses in a transparent, accountable and ethical way, which establishes good corporate governance, the governor explained.

“In this context, the role of ethics in ensuring corporate governance in the banking sector is considered highly critical to the sustainable growth in the banking sector,” he added.

In practicing the ethics in banking, the role of the Board of Directors as well as the Chief Executive Officers of the banks is very significant for banks’ overall performance, he observed.

“The separation or independence of management in its business decision and execution of the banking activities are expected to run smoothly and would be in support of the boards in an ideal scenario,” he pointed out.

In his keynote speech, Dr. Sadiq Ahmed, vice-chairman of Policy Research Institute (PRI) said, the most important aspect of banking ethics is banking governance.

Prior to the reform programme initiated in 1998, banking sector governance was very weak. Even as late as 1997, the banking sector was dominated by corrupt and inefficient public banks, accounting for 67 percent of total deposits and 63 percent of total loans.

Many of the loans of these banks were non-performing owing to weak discipline and inefficient management Loan and interest recovery culture was lax. In summary, banking ethics was weak, he said.

He further said that reforms of the post 1998 period largely restored much of the banking sector governance and ethics.

As a result of deregulation, reforms in the management of public banks and implementation of prudential norms, the overall health of the banking sector improved considerably, he pointed out.

In line with the international best practices Bangladesh Bank, the Central Bank of the country has formulated necessary regulations for both the roles of board of the banks and management of the banks with a view to ensuring the sound corporate governance and ethics in the banking sector, BB governor informed.

BIBM Director General Dr Md Akhtaruzzaman and Dr. Ashraf Al Mamun, Associate Professor and Director (Research, Development & Consultancy) of BIBM, also spoke at the event.

Former governors, deputy governors, senior central bankers, government high officials, top executives from different banks and financial institutions, academicians, faculty members of BIBM participated in the event.

Nurul Matin was born in 1928. He joined the Research Department of the State Bank of Pakistan in 1951 as an Officer Class I and, subsequently, his services were placed in the operational departments of the Bank in 1963.

During his long banking career, Mr. Matin occupied many senior positions including Secretary to the Board of State Bank of Pakistan, Executive Director of Equity Participation Fund, Managing Director and Chairman of Bangladesh Shilpa Bank and Deputy Governor of Bangladesh Bank.

He also worked as the Director of BIBM. He was also one of the founders of BIBM. BIBM initiated this memorial lecture program in 1998 to enhance the ethical value of bankers.