December Banks post healthy operating profits. IFIC BANK LIMITED HR Development & Training Institute Head Office, Dhaka

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1 December-2012 IFIC BANK LIMITED HR Development & Training Institute Head Office, Dhaka Banks post healthy operating profits The country s scheduled banks in the just concluded year posted healthy operating profits despite debacle in the capital market, liquidity crisis, lower loan disbursement and a stagnation condition in opening and settling of letter of credits for import. Although the growth in profits in 2012 was not high compared with the previous years, the banking sector had earned a significant amount of operating profit because of higher interest rates charged by the banks. Besides, the banks got huge profits from the charges they imposed on drafts and pay orders. The financial sector in 2012 had passed an unfriendly environment because of poor business climate in home and abroad that hurt both import and exports. A number of banks were reluctant to open LCs for the local and the foreign products after the Hallmark Group-Sonali Bank scam. Banks usually earn a good amount of profit from the LC opening and settlement but they virtually restrained for participating this business in the later part of the year. The banks also faced huge losses in the capital market which has been going through bear run for almost two years. The general index of Dhaka Stock Exchange lost more than 1,000 points in Bangladesh Bank s latest move to allow banks to keep 20 per cent provisioning against capital market losses instead of 100 per cent helped some banks to make profits. New Age: DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-12. PAGE NO. Page 1 of 20

2 12 banks hold 72pc of default loan Twelve out of 47 banks in the country held 72 per cent of classified loan or default loan of the banking sector as on September 31 of this year as they disbursed significant amount of loans unlawfully to the clients. According to the latest BB data, the classified loans in the 12 banks reached Tk 25, crore which is 72 per cent of the total default loan of Tk 36, crore in the banking sector as on September 31. The 12 banks including four state-owned banks and four specialised banks are Sonali Bank, Janata Bank, Agrani Bank, Rupali Bank, Bangladesh Krishi Bank, Bangladesh Development Bank, Rajshahi Krishi Unnayan Bank, BASIC Bank, Islami Bank Bangladesh, ICB Islamic Bank, National Bank and The City Bank. Default loans in the 12 banks have increased by Tk 5, crore or per cent in July to September from that of the second quarter of the current year, showed the BB data. The classified loans in the 12 banks stood at Tk 20, crore as on 30 June but their default loans significantly increased in the third quarter because of the banks failure to recover a significant amount of loans. BB data showed that the overall default loans in the banking sector had increased by Tk 7, crore at the end of the third quarter of this year. Of these, the classified loan in the 12 banks increased by per cent or Tk 5, crore. The total classified loan in the banking sector increased to Tk 36, crore as on September 30 from Tk 29, crore as on June 30. New Age: Hallmark scam drags down import further in Oct The growth in import bill payment declined further in October as most of the banks were unwilling to open fresh letters of credit in the last few months after the Hallmark Group- Sonali Bank scam. The central bank had also asked the banks in the period to open LCs for importing essential items only in a bid to strengthen its foreign exchange reserve. According to the data released by the BB last week, the settlement of LCs for import posted a negative growth of per cent in October compared with that of the same month in FY when import bill payment increased by per cent on year-on-year basis. The total import bill payment in October stood at $2.61 billion against $2.93 billion in October of 2011 and $2.63 billion in October of The BB data also showed the opening of LCs had registered a negative growth in October compared with that of the same month of FY The opening of LCs for import posted a negative growth of 6.22 per cent in October compared with that of the same month of 2011 when the opening of LCs increased by per cent on year-on-year basis. In October this year, LCs worth $2.58 billion were opened by the banks compared with LCs worth $2.75 billion opened in October of The LC opening in October of 2010 was worth $3.53 billion. The BB data showed that the import of chemical fertilisers, onion, rice and wheat significantly decreased in October compared with that of the corresponding month of The BB data showed that LC settlement in October for chemical fertilisers, onion, rice and wheat were worth $ million, $8.96 million, $1.74 million and $52.96 million respectively against $ million, $19.43 million, $21.66 million and $61.51 million in October of New Age: Bank loan interest rate rises for fifth month Average interest rate on bank loans continued to rise in the last few months with the rate jumping to per cent in October. According to the BB data, 21 banks imposed more than 15 per cent interest rate on loans disbursed in October. Besides, 28 banks in October did not maintain the interest rate spread for lending and deposits set by the Bangladesh Bank, according to the central bank data. The BB in a circular on January 22 asked all banks to maintain a spread, the gap between the interest rates on credit and deposit rates, up to five percentage points for all types of loans, except high-risk consumer loans credit card and SME loans. The DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-12. PAGE NO. Page 2 of 20

3 BB data showed that the interest rate on bank lending had increased in every month from June to October of this year. The interest rate on bank lending in June reached per cent, in July per cent, in August per cent, in September per cent and in October per cent, showed the BB data. The central bank in January had withdrawn the cap on interest rate of lending for import of essential commodities like rice, wheat, soya bean oil and sugar and on industrial term loans excepting loans for pre-shipment exports and agriculture in line with a demand from the commercial banks. The BB also withdrew the cap on the interest rate of the deposit collection from the clients. Against the moves, leaders of different business associations including apex trade body Federation of Bangladesh Chambers of Commerce and Industry slammed the BB for withdrawing the cap on interest rate and allowing the banks to charge higher interest rate. Under the circumstances, the BB had requested all banks to set interest rate on deposits at up to per cent and lending for industries at up to per cent. After the BB s request, the Association of Bankers, Bangladesh, in February set maximum interest rate on lending for industrial sector and essential commodity import at per cent and on deposits at per cent. New Age: Banks' doubtful loans rise in Q3 of 2012 The amount of 'doubtful loan' (DL) in the country's banking sector increased substantially in the July- September period of this year due to the recent scams. The amount of the DL increased by Tk billion in the third quarter of this calendar year (July-Sept 2012) than that of the previous quarter (April-June). By the end of this September, the total DL in the banking sector was Tk billion or 1.25 per cent of the total outstanding loans. The amount was Tk billion or 0.88 per cent of the total loans in June. According to the BB statistics, the four state-owned commercial banks and two specialised banks saw the highest increase in the DL in the third quarter. Of them, Sonali Bank Limited topped the list. The total DL at Sonali Bank stood at Tk billion or 3.27 of the total loans in September, which was Tk 4.23 billion in June. The DL of Janata Bank Limited and Agrani Bank Limited stood at Tk 3.22 billion or 1.20 per cent and Tk 4.02 billion or 2.07 per cent respectively by the end of September. The amount of DL at Krishi Bank and Rajshahi Krishi Unnayan Bank stood at Tk 7.78 billion or 5.6 per cent and Tk 2.06 billion or 5.79 per cent respectively. The DL at the private banks reached Tk billion by the end of September against Tk 6.34 billion in the previous quarter ending in June. The amount of the total DL of foreign banks stood at Tk 589 million on September 30. Fin. Exp: Banks reluctant in green financing Only 16pc of BB s annual target disbursed in nine months All banks have disbursed only Tk crore in green financing in nine months although Bangladesh Bank set a disbursement target of Tk 2, crore in The banks have disbursed only per cent of the annual target of green financing in January-September as they are more inclined to give consumer and shortterm loans for opening letter of credits. The loans for installation of effluent treatment plants at industries, biogas plants, solar panels, bio fertiliser plants and hybrid brick kilns are considered as green financing. Many of the banks think that financing in the green projects would not bring any immediate benefits for the entrepreneurs thus affecting the chance of repayment of loans. So the banks go for more productive loans for quick profits. A publication of the central bank on Green Banking in Bangladesh released on December 03 showed that 45 banks had formulated policies for green financing as per the BB directive and 46 banks formed green banking units. But, four state-owned commercial banks disbursed only Tk 2.55 crore in January- September against the annual target of Tk 616 crore. The foreign commercial banks also disbursed a paltry amount of Tk 7.68 crore in nine months against the annual target of Tk crore. The state-owned specialised banks released only Tk crore against the 12-month target of Tk 135 crore. Private commercial banks disbursed Tk crore against the annual target of Tk 1, crore. New Age: DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-12. PAGE NO. Page 3 of 20

4 Remittance inflow hits five-month low in Nov The country s remittance inflow hit a five-month low of $1.09 billion in November due to the post-eid hangover. The remittance inflow in November slowed down as the expatriate Bangladeshis sent a record $1.45 billion in October on the occasion of the Eid-ul-Azha. Traditionally the remittance inflow slows down after Eid. BB data showed that the remittance inflow in November decreased by per cent compared with that of October. The figure of November was lowest in five months as remittance inflow in September was $1.17 billion, in August $1.17 billion and in July $1.20 billion. BB data, however, showed that remittance inflow in the first five months of the current financial year increased by per cent compared with that of the same period of the last financial year. The expatriate Bangladeshis in July-November of FY sent $6.11 billion in remittance against $4.92 billion during the corresponding period of FY BB data also showed that remittance inflow in November had increased by per cent compared with that of the same month of FY , when $ million was remitted. New Age: Banks did little to promote online banking in Q3 Banks showed little progress in promoting online banking under the Bangladesh Bank s green banking programme from July to September this year. The state-owned, the specialised and development, and the private commercial banks had not taken sufficient measures to introduce online banking from July to September of this year although the BB had frequently asked them to take measures in this regard. According to the latest BB data, the SCBs did not introduce online banking in any of their branches in the period. The BB data showed only 168 branches out of 3,469 branches of the four SCBs had so far introduced online banking. The SCBs brought only 4.84 per cent of their branches under the online banking system. From July to September, the specialised banks promoted online banking only in 11 branches and the number of their automated branches increased to 60, which was 4.19 per cent of their total 1,433 branches. The BB data showed the PCBs had introduced online banking only in eight branches in the third quarter of this year. The BB data, however, showed the PCBs so far had made significant progress in introducing online banking as they automated 2,925 branches out of their 3,224 branches. They brought per cent of their branches under the online banking system till September. The BB data showed foreign commercial banks had brought 100 per cent of their branches under the online banking system. New Age: Banks asked to submit overdue loan statements quarterly The Bangladesh Bank has asked all banks to submit their statements of the sector-wise overdue loans on a quarterly basis instead of submitting those every six months. The initiative was taken with a view to strengthening the monitoring and supervision system in the banking sector. The BB on December 3 issued a circular informing the banks that from now on they would have to submit the statements of overdue loans to the central bank in a month after the end of a particular quarter. The statements would cover overdue loans in sectors like agriculture, industry, working capital, export, import, commercial, readymade garments and textile, acceptance bill, construction, bank guarantee, shipbuilding and ship breaking. The BB issued the circular to tackle the loan-related embezzlement in the banking sector. New Age: Mobile banking witnesses 'hockey-stick growth' Mobile banking, one of the easy modes to implement the 'financial inclusion' theme in the country has recently witnessed an almost 'hockey-stick growth' driven mainly by hassle-free services and easy access to service DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-12. PAGE NO. Page 4 of 20

5 centers. With a whopping 275 per cent rise, a total of 1.5 million subscribers came under mobile banking service till November 30,2012 against 0.4 million of March last, according to Bangladesh Bank (BB) statistics. Mobile banking service is more suitable for the huge working people against the traditional banking services. Around Tk 330 million transactions per day is being settled under the mobile banking services. Each month, the transaction volume through mobile banking is increasing by 15 per cent, the BB data said. The BB sources said through this service, transaction worth around Tk 10 billion (1000 crore) takes place in each month. The central bank has so far given approval to 23 banks for delivering mobile banking services as an alternative payment channel in the banking sector. Fourteen of the 23 banks have already started their mobile banking services, a central bank report said. Fin. Exp: High remittance, low imports widen BoP surplus The first quarter of the current fiscal year saw the country consolidate its balance of payment surplus on the back of high inward remittance and low import bills. The surplus stood at $1.11 billion in the first quarter of fiscal 2012, according to data from Bangladesh Bank. A deficit of $99 million was recorded in the same period last fiscal year. Import spending in the first three months of the current fiscal year increased by only 1.98 percent, while remittance increased by more than 19 percent. The decrease in export growth accounts for the fall in import bills, as a big chunk of import spending is earmarked for the export-oriented garment factories. Exports grew by 1.34 percent in the first three months, due to the slowdown in the Eurozone and the US. Another reason for the lower import spending is the decrease in food imports. Since both of export and import growth fell, there was more or less no year-on-year change in trade deficit. The current account balance in the first quarter was $135 million surplus, while it stood at $8 million deficit in the same period last fiscal year. The Daily Star: BB strengthens banking supervision to check fraud The central bank has strengthened its supervision on banks to check fraud in the banking system in settling bill purchases following the Hall-Mark scam. In a notice, Bangladesh Bank asked banks to turn in applications in 15 days for settling import payment against back-to-back letters of credit using local sources -- fully or partially. The banks are advised to submit the applications to the offices of Bangladesh Bank for approval within 15 days of the following month of effecting the payment, the central bank said. In another circular, the regulator said starting from January 1 next year, ADs would have to report all types of their foreign exchange transactions through its web portal on daily basis. Bangladesh Bank has taken initiative to receive online statement through its web portal. As part of the programme, its Foreign Exchange Operation Department has already started monitoring export transactions through online reports submitted by authorised dealers. The central bank has developed online reporting system for all types of cross border foreign exchange transactions, including foreign exchange transactions, through inland back to back letters of credit. The Daily Star: Classified loan in industrial sector increases in Q1 The classified loan in industrial sector increased significantly in the first quarter of the current financial year compared with that of the corresponding period of FY as a number of banks disbursed a large amount of loans improperly. Banks had earlier disbursed significant amount of industrial loans, of which a large amount of loans did not went to the appropriate sector. According to the latest BB data, the classified industrial term loan grew by per cent in July to September of FY , up from 7.27 per cent in the DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-12. PAGE NO. Page 5 of 20

6 same period of the last financial year. The classified industrial term loan increased to Tk crore in the first quarter of FY against Tk 5, crore in the first three months of FY The total industrial term loan in the first quarter of FY reached Tk 5, crore. In the first quarter of FY , industrial term loan disbursement by banks and NBFIs increased by per cent, up from a negative growth of 0.48 per cent in the same period of FY The total disbursement of industrial term loans in July to September of FY stood at Tk 9, crore against Tk 7, crore in the same period of FY The total term loan disbursement in the first quarter of FY was Tk 7, crore. The overall industrial classified loan in the first three months of FY also increased significantly compared with that of the corresponding period of FY BB data showed that the classified industrial loan increased to Tk 10, crore in the first quarter of FY against Tk 9, crore in the first three months of FY New Age: BACK-TO-BACK LOCAL LCS BB sets time for banks to settle post-facto approval Bangladesh Bank asked all the banks to submit the applications for the post-facto approval in 15 days of the following month of effecting the import payment against back-to-back local letters of credit. The BB issued a circular in this regard to authorised dealer branches of all banks saying that it had come to the notice of the BB that ADs were making inordinate delay in forwarding the applications to obtain the post-facto approval from the central bank after settlement of letters of credit against the back-to-back LCs. The circular said that ADs were asked to submit the applications to offices concerned of the BB for the post-facto approval within 15 days of the following month of effecting the payment. New Age: HSBC hit with record $1.92b fine HSBC Holdings Plc has agreed to pay $1.92 billion to settle a multi-year US criminal probe into moneylaundering lapses at the British lender, the largest penalty ever paid by a bank. HSBC admitted to a breakdown of controls and apologised in a statement announcing it had reached a deferred-prosecution agreement with the US Department of Justice, as was first reported by Reuters last week. The bank said it expected to also reach a settlement with British watchdog the Financial Services Authority. US and European banks have now agreed to settlements with US regulators totaling some $5 billion in recent years on charges they violated US sanctions and failed to police illicit transactions. No bank or bank executives, however, have been indicted as prosecutors have instead utilised deferred prosecutions. HSBC s settlement comes a day after rival British bank Standard Chartered Plc agreed to a $327 million settlement with US law enforcement agencies for sanctions violations, a pact that follows a $340 million settlement the bank reached with the New York bank regulator in August. New Age: Exports rise 11pc in Nov Concern over future growth in RMG shipments The country's export earnings increased by about 11 percent year-on-year to $1.76 billion in November, thanks DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-12. PAGE NO. Page 6 of 20

7 to growth in readymade garment shipments. The figure, however, fell short of November's target of $1.99 billion. In November, overall garment exports stood at $1.36 billion, up 8.8 percent from the same month a year ago. Knitwear raked in $ million, while woven garments brought $ million, according to EPB. Although apparel exports registered decent figures, garment manufacturers are worried over growth prospects. The Daily Star: No refund of mutilated bank note if damaged over 50pc Mutilated or charred bank note holders will not get any refund if the single largest piece of the note is below 51 per cent of the note, according to a new regulation of the Bangladesh Bank. The BB issued the Bangladesh Bank (Note Refund) Regulations-2012 by scrapping Bangladesh Bank (Note Refund) Regulations According to the new regulations, banks will pay 50 per cent value of a mutilated or charred note to the clients, if the single largest piece of the note presented before the banks is between 51 per cent and 75 per cent of the note. The clients will get 75 per cent of its value, if the single largest piece presented is between 76 and 90 per cent of the note. Full value of the note will be payable if the single largest piece of a mutilated or charred note presented is more than 90 per cent of the note. No claim in respect of a charred note will be considered unless the unburnt area of the note is more than 50 per cent of the note. New Age: JPMorgan No 1 in US customer survey, while rivals fall back JPMorgan Chase & Co jumped to first in a US customer satisfaction survey, as its three biggest rivals, including perennial leader Wells Fargo & Co, posted a decline in their scores, reports Reuters. JPMorgan, the largest US bank by assets, saw its score climb nearly 6 per cent from last year to 79 on a 100-point scale. But smaller banks and credit unions continued to record higher numbers than all large banks, according to an annual report by the American Customer Satisfaction Index. Big banks have drawn the ire of customers for receiving bailouts during the financial crisis and for rolling out higher fees in recent years. Still, the survey found that all of the large banks, except for Bank of America Corp, have seen their scores match or eclipse pre-financial crisis levels.wells Fargo had held the top spot among big banks for 11 years, counting eight years for Wachovia, which Wells bought in Its 3 per cent drop to 71 is a concern for the bank, but not a major one unless a downward trend develops. Over the years, the bank has touted its No. 1 ranking in the survey, even as it was completing a major merger. Meanwhile, Chase s score showed the bank is boosting the reliability and quality of its banking experience, producing increases in the past two years. Citigroup Inc s score fell 4 per cent to 70, while Bank of America s fell 3 per cent to 66. Smaller banks as a group stayed flat with a score of 79 in this year s survey, while credit unions fell 6 per cent to 82. New Age: BB cuts ALS to mop up excess fund from market The central bank has expedited its operations to mop up excess fund from the market using different monetary instruments for curbing inflationary pressure on the economy. As part of the moves, the Bangladesh Bank (BB) slashed Assured Liquidity Support (ALS) for both primary dealer (PD) and non-pd banks, bypassing its previous directive. Under the existing provisions, the PD and non-pd banks are allowed to enjoy liquidity support against both success and devolved securities for a maximum of two and a half months at a stretch from the date of issuance of government-approved securities. On July 18, the BB unveiled its new half-yearly MPS, aiming to curb inflation further while ensuring adequate credit flow to the private sector for achieving 'inclusive' economic growth. Both the PD and non-pd banks submitted requisition seeking Tk billion as special repo in the late hours on the day to comply with the BB's CRR. The central bank, however, accepted the special repo amounting to around Tk 9.0 billion. Currently, three treasury bills (T-bills) are being transacted through auctions to adjust the government's borrowing from the banking system. They are 91-day, 182-day and 364-day T-bills. On the other hand, four government bonds with 5-year, 10-year, 15-year and 20- year tenures are being traded in the market. Fin. Exp: BB seeks support from municipality mayors to motivate SME owners Bangladesh Bank (BB) has sought support from mayors of municipalities across the country as part of its fresh DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-12. PAGE NO. Page 7 of 20

8 move to identify small and medium entrepreneurs. Many small and medium entrepreneurs can easily take loan from banks but a good number of such entrepreneurs, especially those living in rural areas, are not availing this opportunity due to lack of information, the BB added. Earlier, the central bank sent letters to cambers and deputy commissioners across the country seeking their support about the small entrepreneurs. Besides, the BB sent SMS (short message service) to subscribers of private cell-phone operators, Grameen Phone and Airtel, to inform them about the availability of bank loan for medium and small enterprise (SME). A separate desk has been set up at the BB's SME department and an entrepreneur can collect all information, including credit facility, calling the phone No from 10am to 6pm on all working days. Entrepreneurs of the SME sector can borrow minimum Tk 0.5 million and maximum Tk 50 million from banks-financial institutions side by side under the evolving credit scheme of the central bank. Fin. Exp: BB's steps raising green banking The Bangladesh Bank (BB)-initiated green banking project is gaining popularity in a rapid pace due mainly to various positive steps taken by the central bank. Under the project, refinance scheme was introduced in August 3, 2009 to fund renewable energy projects to increase power generation in the country. According to the central bank data, the commercial banks have disbursed Tk million out of Tk 2.0 billion revolving fund in 40 months under the refinance scheme of the central bank until October this year. About 42 per cent of the total amount has been disbursed among the interested entrepreneurs under the scheme. According to BB statistics, loan disbursement for solar home system was Tk 87.8 million until October this year, while Tk 23.9 million for solar irrigation pump, Tk million for solar photovoltaic module assembling plant, Tk million for bio-gas, Tk 90.4 for effluent treatment plant (ETP) and Tk million for HHK technology in brick making industry. The central bank is also advising the banks to avail more credits from the revolving fund and finance the green and environment-friendly projects like bio-gas plant. The central bank with a view to encouraging the commercial banks to boost loan disbursement increased the interest rate for green banking in May last to 11 per cent from 10 per cent. Under the special scheme, banks and financial institutions get credit from the central bank in the form of refinance at 5.0 per cent interest. Fin. Exp: FARM LOAN DISBURSEMENT 16 banks disburse under 20pc of annual target in 5 months Sixteen commercial banks disbursed under 20 per cent of their annual target for agricultural loans in the first five months of the current financial year, according to BB data. The BB data, however, showed that disbursement of agricultural loans by all banks increased by 4.85 per cent in the July to November period compared with that of the same period of FY Banks collectively disbursed Tk 4, crore, or per cent of their annual target of Tk 14,130 crore, in farm loans in July-November of the FY In the first five months of the FY , banks had disbursed Tk 4, crore, or per cent of their annual target of Tk 13,800 crore, in farm loans. Loan disbursement by banks usually increases during the aman and the boro cultivation seasons that fall on the first six months of a financial year. The loan disbursement in the first five months increased slightly because of the two cultivation seasons. A bank should disburse per cent of its annual target for farm loans in the first five months of a year to achieve its target. The central bank would continue to take stern action against the banks which would fail to meet the annual target. New Age: Eurozone inflation confirmed at 2.2pc Inflation in the 17-country eurozone fell sharply to 2.2 per cent in November from 2.5 per cent in October, official data confirmed, as the slowing economy took pressure off prices. The Eurostat data agency gave national breakdowns as 1.9 per cent for Germany, 1.6 per cent for France and 2.6 per cent for Italy, with Greece at just 0.4 per cent. The latest data means that eurozone inflation has remained above the European Central Bank's target of below but close to 2.0 per cent since December 2010, but also that it is stabilising for the first time in two years. Fin. Exp: DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-12. PAGE NO. Page 8 of 20

9 Fed to tighten rules for foreign banks in US The Federal Reserve moved to place large foreign banks under the same regulatory regime it applies to domestic banks, aiming to reduce the risk of a foreign bank collapse hurting the US financial system. Adding fresh local regulation to the banks on top of the Basel III capital rules, the largest foreign banks will have to set up US holding companies for their US operations, have limits set on their credit exposure, and meet local capital and liquidity rules for their US operations. They will also be subject to Fed stress tests on their US operations, to make sure they have enough local buffer to withstand external shocks, whether from inside the United States or outside. The new rules, which if finalised will come into effect on July 1, 2015, follow the tighter regimes set for the largest US banks in the wake of the Wall Street financial crisis of 2008, which saw large undercapitalized banks and non-banks melt down and either close or require substantial rescues from the government. Fin. Exp: Moody's upbeat on Bangladesh Global rating agency Moody's found a number of positive aspects of Bangladesh's economic condition -- steady growth trends, a positive external sector, stable exchange and interest rates, and the momentum in reforms. Bangladesh is the only South Asian country that has consistently posted current account surpluses in the past decade, it said in a recent comment. Higher capital flows may take reserves closer to $13 billion by end-2013, from $10.3 billion at the end of fiscal However, Moody's said the continued labour unrest and the possibility of a messy transition to parliamentary elections in 2014 could derail the smooth progress in reforms. The Daily Star: Forex reserves hit new high of $12.4b Bangladesh's foreign exchange reserves hit a record high of $12.4 billion on December 18,2012 breaking the October figure of $12.36 billion. The country's imports fell percent to $10.75 billion during the July- October period from the same period last year. The country imported goods and services worth $2.65 billion in October, down from $2.73 billion in September. The total value of import LCs opened by authorised dealer banks declined percent to $11.52 billion in first four months of the current fiscal year, according to data from the central bank. LC openings increased for wheat by percent while it decreased for rice by percent, sugar percent, onion percent and milk food percent. The Daily Star: Import payment falls in Nov as banks reluctant to open fresh LCs The growth in import bill payment declined further in November as most of the banks were reluctant to open fresh letters of credit in the last few months. Banks continued to show reluctance in opening LCs although Bangladesh Bank frequently asked banks to increase the opening and the settlement of LCs in the period. According to BB data, the settlement of LCs for import posted a negative growth of per cent in November compared with that of the same month in FY when import bill payment increased by per cent on year-on-year basis. The total import bill payment in November stood at $2.66 billion. It was $3.09 billion in November 2011 and $2.48 billion in November The central bank had recently revealed that a majority of commercial banks imposed 50 per cent to 100 per cent margin against the amount of a fresh LC opening. For this reason, the importers are also showing reluctance in opening LCs with such banks. Due to lower import growth, the country s trade deficit decreased by per cent to $2.51 billion in the first four months of the current financial year. The BB data, however, showed that the opening of LCs for import posted a growth of percent in November compared with that of the same month of 2011 when the opening of LCs registered a negative growth of per cent on year-on-year basis. In November this year, LCs worth $2.78 billion were opened by the banks compared with LCs worth $2.47 billion opened in November of New Age: Idle fund swelling in banks amid poor business climate Surplus liquidity in the banking sector increased significantly in the last one and a half month as most of the scheduled banks were reluctant to provide loans to the private sector. A number of commercial banks had DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-12. PAGE NO. Page 9 of 20

10 frequently failed to maintain the cash reserve ratio with the central bank in the first four months of the current financial year, but they were now keeping funds many times more than the CRR set by the central bank. According to the latest BB data, the excess liquidity of the banks in the CRR fund with the central bank stood at Tk 2, crore on December 13, Tk 6,68.80 crore on December 12, Tk 1,633 crore on December 11, Tk 1, crore on December 10, and Tk 1, crore on December 9 of this year. The BB data showed that in the same period of the last year, the banking sector had faced a shortfall in the liquidity and a slight excess liquidity against the CRR set by the central bank with the CRR deficit reaching Tk 200 crore on December 10, New Age: BB appoints fraud detection adviser The central bank takes other supervisory steps to rein in irregularities in banks Bangladesh Bank has appointed a fraud detection adviser and taken some other supervisory steps to stop irregularities in the banking sector in the backdrop of the recent Hall-Mark loan scam. A web-based corporate memory management system (CMMS) has also been developed to record violation of banking rules by the officials and directors of banks and other financial institutions. Some irregularities by bank officials and directors have already been recorded in the CMMS and these will be reviewed later for taking further actions. In another move, the BB has asked the banks to form a separate risk management unit. The units will do risk modeling, determining their risk limit, and analysing and supervising all the existing risks. The financial integrity and customer service department of the central bank has inspected 53 branches of 26 banks that had links with the Hall-Mark scam carried out through the Sonali Bank's Ruposhi Bangla branch. The BB also has started regular preparation of diagnostic review report of the banks to bring the concerned banks under intensive monitoring after evaluating the gravity of irregularity through distant cautionary signal. The banking regulator also said an assessment system has been introduced in banks to avert any probable irregularity. The Daily Star: Banks need not pay advance incentives to exporters The Bangladesh Bank said the authorised dealer branches of the scheduled banks would not need to disburse an advance payment of 70 per cent as export and cash incentives to the exporters due to a government decision. To this end, the BB issued a circular addressing the managing directors and chief executive officers of all banks saying that the government had recently taken a decision that from now on the finance ministry would disburse four equal premiums of export and cash incentives to the exporters at the first week of every quarter. For this reason, the authorised dealer branches do not need to disburse an advance payment of 70 per cent to the exporters as export and cash incentives. The circular also said that the banks, however, can take their own decision on the basis of bank-client relations. New Age: ADR in banks decreases for lower loan disbursement The advance-deposit ratio in the banking sector decreased significantly as majority of the banks are reluctant to disburse loan due to a negative investment scenario in the country s business sector. Due to a decreased loan disbursement by the banks, the advance or credit-deposit ratio of the banking sector has gone down significantly from the limit of 85 per cent permitted by the BB. According to the latest BB data, the ADR in the banking sector had stood at per cent as on November 15 from per cent as on June 7 of this year, meaning that the bank gave Tk as loans against a deposit of Tk 100. A number of banks had earlier crossed the ADR limit but now the scenario changed as the country s banking sector had recently adopted a restricted credit disbursement policy after the discloser of Hallmark Group-Sonali Bank loan scam. BB data showed that the ADR ratio in the four state-owned banks had gone down to per cent as on November 15 from per cent as on June 7. The ADR ratio in the local private commercial banks and the foreign commercial banks stood at per cent and per cent as on November 15 from per cent and per cent as on June 7 respectively, showed the BB data. New Age: DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-12. PAGE NO. Page 10 of 20

11 Bangladesh rated high Bangladesh is among a number of emerging countries that could overtake the west by 2050, as they are growing fast, according to The Guardian newspaper. "As the west remains mired in gloom and even the BRICS start to plateau, attention is turning to this group of countries, many of which not so long ago were rudely dismissed as basket cases. As even BRICS [Brazil, Russia, India, China and South Africa] plateau, other countries, from Bangladesh to Mexico, are coming up fast and could overtake the west by "They are big. They have young and growing populations. They have invested in infrastructure and education. And they are growing at the sort of rates that make them the envy of the recession-hobbled west." " when growth rates for 2013 are chalked up, these are the countries that will dominate the top 20. The Daily Star: BB report shows economy does well in 4yrs, hides biggest banking scam The Bangladesh Bank showed a rosy picture of the country s economy during the last four years comparing with the period of and in the process it did not mention anything about the biggest ever banking scam by Sonali Bank and Hallmark Group this year. The central bank in a report said that the country s economy was progressing well despite the global economic recession and the average GDP growth soared to 6.21 per cent in compared with the 5.47 per cent growth in Bangladesh Bureau of Statistics data showed that the GDP growth rate had increased to 6.63 per cent in before coming down to 6.19 per cent in The GDP growth in soared to 6.71 per cent but came down to 6.32 per cent in the last fiscal year. The report showed that the average annual inward remittance grew to $11.29 billion in from $3.20 billion in while the foreign exchange reserve soared to $12.70 billion from $2.93 billion. But, when the BB report compared the capital adequacy in the banking sector, it showed the adequacy increased to $56,201 crore in June 2012 from Tk 20,578 crore in June It also showed the classified loan in the banking sector came down to 7.17 per cent in June 2012 from per cent in June New Age: 'Cautious' BB policy slows down banks' credit growth The overall growth of bank credits witnessed a declining trend in recent months due mainly to the central bank's 'cautious' monetary policy stance. The deposit growth, however, maintained an almost static situation during the same period despite the inflationary pressure on the economy, which has further limited the scope for expansion of normal deposits with banks. Credit growth, particularly in private sector, dropped by per cent or Tk billion as of November 15 last from per cent or Tk billion on August 16 this year. The growth of bank deposit also declined by per cent or Tk billion from per cent or Tk billion, according to the central bank statistics. The average CDR of all banks came down to per cent on November 15 last from per cent on August 16, the BB data showed. Regarding deposit growth, the private banker said higher growth of inward remittances contributed to a stable growth of bank deposits in the recent months. Bangladesh received $6.11 billion as remittance earnings during July- November period of the current fiscal year, registering a per cent growth over the corresponding period of the previous fiscal. The central bank earlier set the CDR at 85 per cent for the conventional banks, while it remains at 90 per cent for the Sharia-based Islamic banks. Fin. Exp: Govt on fresh bank borrowing spree The government started to borrow heavily from the commercial banks from the second week of this month for meeting its daily expenses which will create extra pressure on the banking system in the coming months. According to the latest BB data, the government borrowed Tk 1, crore in just three working days between December 12 and December 17 from the commercial banks. The government borrowing this financial year from the banking source stood at Tk 9, crore on December 12 and the figure went up to Tk 10, crore on December 17 in which the whole amount had been borrowed from the commercial banks. The government had repaid Tk 6.25 crore to the central bank till December 17 it had received as loans earlier. The government borrowing this financial year from the banking source stood at Tk crore on August 6, DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-12. PAGE NO. Page 11 of 20

12 Tk 2, crore on October 4, and Tk 6, crore on October 23. The overall bank borrowings by the government increased to Tk 1,02, crore on December 17 from Tk 92, crore on June 30. The government has set a target to take Tk 23,000 crore loans from the banking sector in the budget for FY The government s total borrowing in the FY 12 stood at Tk 21, crore resulting in a liquidity crisis in the banking sector and squeezing of credit supply to private sector. New Age: INTEREST SPREAD, ADR BB warns 14 banks for failure to maintain rates The Bangladesh Bank warned 14 scheduled banks for their failure to maintain the interest rate spread for lending and deposit, and advance-deposit ratio set by the central bank. The central bank had issued the warning at a meeting with the managing directors and chief executives officers of the 14 banks at the central bank s headquarters in the capital. Of the 14 banks, five banks failed to maintain the ADR, six the interest spread rate and three both the ADR and the spread. The five banks which failed to maintain the ADR are ICB Islamic Bank, Social Islami Bank, BASIC Bank, Bangladesh Development Bank and Rajshahi Krishi Unnayan Bank. The six banks which failed to maintain the spread rate are Uttara Bank, IFIC Bank, Prime Bank, Dutch- Bangla Bank, Jamuna Bank and BRAC Bank. The three banks which failed to maintain both the ADR and the spread are Pubali Bank, The City Bank and Dhaka Bank. New Age: Loan classification eased for small borrowers The Bangladesh Bank eased loan classification and provisioning for micro-credits, short-term agriculture loans and fixed-term loans amounting to up to Tk 10 lakh in a bid to protect small borrowers from defaulting loans. BB issued a circular to the managing directors and chief executive officers of all scheduled banks saying that loans except short-term agricultural loans and micro-credits in the special mention account and sub-standard would not be treated as default loans under section 27KaKa(3) of the Banking Companies Act, If any installment or a part of an installment of a fixed-term loan amounting to up to Tk10 lakh is not repaid within the due date, the amount of the unpaid installment would be termed as past due or overdue installment. If the amount of default installment is equal to or more than the amount of installment due within six months, the loan will be classified as sub-standard. If the amount of default installment is equal to or more than the amount of installment due within nine months and 12 months, the loans will be classified as doubtful and bad loans respectively. For a fixed-term loan amounting to over Tk 10 lakh, the loan will be classified as sub-standard if the amount of past installment is due for three months. The loan will be classified as doubtful and bad category ones if the amount of default installment is equal to or more than the amount of installment due within six months and nine months respectively. New Age: BB opens gateway to e-commerce The central bank launched National Payment Switch, a common platform for the country's commercial banks for electronic payments, which is going to revolutionise e-commerce in Bangladesh. The advantages of this new payment platform are enormous. E-commerce will spread across the country. Once all banks in Bangladesh join the NPS, a customer using a credit or debit card of any bank will be able to draw cash from any ATM and POS (point of sales) in the country. And transaction costs will significantly go down as the transactions will be routed through the NPS instead of Visa, Master or Amex card networks abroad. Moreover, purchase and sale can be done with cards through the internet and web portals within the country. Only three banks -- Dutch-Bangla, Pubali and Southeast -- have so far joined the NPS. BB officials said it will take two or three months for all banks to join the network. The Daily Star: Bangladeshis can use int l credit card to book overseas hotels The Bangladesh Bank has said that the Bangladeshis could now use their international credit cards for booking overseas hotels online. The central bank issued a circular in this connection to the authorised dealer branches of all banks saying that from now on the Bangladeshis holding ICCs would get the facility of using their cards for booking hotels online in the foreign countries. The foreign residential hotels usually required ICCs to DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-12. PAGE NO. Page 12 of 20

13 reserve their room. Besides, some embassies are reluctant to provide visa before hotel booking by an applicant in their countries. Under the circumstances, the BB has taken the decision to facilitate the foreign travels by businessmen, students and officials of the government and the private agencies. Bangladeshi students usually pay their fees for application, registration, admission and examination abroad through ICCs. Before the issuance of the circular, the Bangladeshi citizens could use their ICCs only when they stayed in the foreign countries. New Age: SPECIAL MENTION ACCOUNT LOANS Risky loans double in 9 months Loans in the special mention account category in the banking sector increased by per cent in the first nine months of this year as a number of banks disbursed significant amount of loans unlawfully to clients in the period. According to the latest BB data, the SMA loans in the banking sector increased to Tk 10, crore as on September 30, 2012 from Tk 5, crore as on December 31, The interest accrued on such loans will be credited to interest suspense account instead of crediting it to income account for reflecting the real picture of profit in the balance sheet. Banks will have to report to the credit information bureau of the BB in every quarter on the trend of the SMA loans. The SMA loan in the banking sector increased by per cent in the third quarter (July-September) compared with that of the second quarter (March-June) of this year. The BB data showed that the SMA loans had increased to Tk 10, crore as on September from Tk 9, crore as on June 30 of this year. SMA loans in the state-owned banks had increased significantly in the nine months till September. The SMA loans in the SCBs increased to Tk 5, crore as on September 30 which was per cent higher than Tk 2, crore as on December 31, The SMA loans in the private commercial banks increased to Tk 4, crore as on September 30, up by per cent from Tk 2, crore as on December 31, New Age: BB issues circular to frame money laundering guideline The central bank asked all stakeholders concerned to frame a complete guideline on 'Know Your Client' (KYC), record keeping, transaction monitoring and reporting, internal control, policies and procedures to comply with the Anti-Money Laundering Act The Bangladesh Bank also asked the stock dealers and brokers, portfolio managers and merchant bankers, securities custodians and assent management companies to form their respective units under the leadership of a high-official each for prevention of money laundering and terror financing. "Stock market-related institutions should carry out an independent audit to evaluate the effectiveness of the steps taken for checking money laundering and terror financing," a circular issued by the central bank said. The directive came in pursuance of complying with the requirements of the global antimoney laundering watchdogs-financial Action Task Force (FATF) and Asia Pacific Group (APG). In the directive the BB asked the stakeholders to keep detailed information of their new and old clients. It also asked the stakeholders to be more cautious and take due diligence in the case of politically exposed persons (PEPs) because of the risk of money laundering. The circular also gave details on how to report and monitor suspicious accounts and transactions. It asked the stakeholders to be more cautious and follow appropriate screening mechanism while recruiting manpower. Fin. Exp: Investment in stocks BB allows banks to comply with provisioning in phases The central bank has given an opportunity to the commercial banks for deferment of maintaining provisioning requirement for investment in stocks. Under the new provisions, the banks are now allowed to maintain 20 per cent provisioning, instead of 100 per cent, against their own investments in the stocks by December 31. The banks, however, will have to comply with the rest 80 per cent provisioning requirement by four quarters in The Bangladesh Bank (BB) has allowed only those banks that had appealed to it earlier in this connection under some conditions. Both Bangladesh Association of Banks (BAB) and Association of Bankers, Bangladesh (ABB) earlier recommended the central bank for reducing provisioning requirement against their investment in share market. Fin. Exp: DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-12. PAGE NO. Page 13 of 20

14 Bangladesh bank Circulars during December, 2012 Circular Number Date Subject DOS Circular Letter No /12/12 Reporting of Quarterly Statement regarding Sector wise Outstanding Loans DMD Circular Letter No /12/12 Regarding destruction of mutilated or cancelled 100-tk. denominated Prize bond BRPD Circular Letter No /12/12 Amended Duty of The Stamp Act, 1899(Act II of 1899) FEPD Circular Letter No. 09/12/12 Online reporting of foreign exchange transactions FEPD(Export)220/ DCM Circular No. 2012/04 10/12/12 Regarding Bangladesh Bank (Note Refund) Regulations FEPD Circular Letter No. 10/12/12 Post facto approval for settlement of import payment FEPD(Import Policy)/123/ under back to back letter of credit through local sources FEPD Circular Letter No /12/12 Regarding betel-nut export DMD Circular Letter No /12/12 Regarding providing liquidity support to primary dealers DFIM Circular Letter No /12/12 Amended Duty of The Stamp Act, 1899(Act II of 1899) DMD Circular No /12/12 Secondary Trading Through Market Infrastructure (MI) module using Trader Work Station BRPD Circular Letter No /12/12 Effective monitoring of the claims filed under Certificate Cases BFIU Circular No /12/12 Instructions to be followed for international and domestic wire transfer FEPD Circular Letter No. 18/12/12 Submission of Exchange Position through Rationalized (FEMP)/01/ Input Template (RIT) in web Portal FEPD Circular No /12/12 Time limit for submission of application for Export Subsidy/Cash Incentive in Textile and others related sectors FEPD Circular No /12/12 Time limit for implementation of different Stimulus packages PSD Circular No /12/12 Implementation of National Payment Switch Bangladesh (NPSB) FEPD Circular No /12/12 Online hotel booking using International Credit Cards (ICCs) on Internet BRPD Circular No /12/12 Loan Classification and Provisioning BFIU Circular No /12/12 Instructions to be followed by Capital Market Intermediaries for compliance of the prevention contained in the Money Laundering Prevention Act and Anti-Terrorism Act, 2009 (Including amendment of 2012) FEPD Circular No /12/12 New Edition of Code Lists for Reporting of External Sector Transactions by the Authorized Dealers Source: BB website Information on Economy Amount 1. Foreign Trade: Million US$ Million US$ Previous year s/ month s Position a. Exports ( ) b. Exports (October-2012) c. Imports ( ) d. Imports (October-2012) Workers Remittance (October-2012) Inflation: point to point (October-2012) Export= FOB Value, Import = CFR Value Economic Trends: December 2012 DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-12. PAGE NO. Page 14 of 20

15 Banking Sector and Economic Information: Amount (TK in Cr.) Amount (TK in Cr.) August July Bank Deposit (excluding inter bank) Bank Credit (excluding inter bank) Money Supply a. Currency Outside Banks b. Demand Deposit c. Deposit with BB other than DMBs d. Narrow Money (a+b+c) e. Time Deposit Broad Money (d+e) Excess Reserve (Liquidity) Weighted average rate of Deposits of Schedule Banks(Quarterly) 6. Weighted average rate of Advances of Schedule Banks(Quarterly) 7. Ratio of DMBs Credit to Deposits (%) DMBs Total Assets/Liabilities F.E. Reserve (million $US ) Cash Base of the Economy Narrow Money (M1) = Currency outside Banks+ Demand Deposits +Deposit with Bangladesh Bank Broad Money (M2) = M1 + Time Deposit DMBs = Deposit Money Banks Cash Base of the Economy = Currency in Circulation+ Balances with Bangladesh Bank Monthly Economic Trends: December 2012 (p)= Provisional Readers please: As per Bangladesh Bank statistics, what was the total number of mobile banking subscribers in our country? Match our answer with yours: Knowledge Update: 166 Answer: There are nine members in the Asian Clearing Union (ACU) Team Members A. K. Mojibur Rahman, SAVP Jayanta Sutradhar, SO Barni Saha, OG I DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-12. PAGE NO. Page 15 of 20

16 IT CORNER Basics of IT Snapshot-12 Contributed by: Biprajit Saha, AVP, IT Division Big Data Big data really big? In IT terminology, big data is a collection of data sets so large and complex that it becomes difficult to process using on-hand database management tools. The challenges include capture, curation, storage, search, sharing, analysis, and visualization. The trend to larger data sets is due to the additional information derivable from analysis of a single large set of related data, as compared to separate smaller sets with the same total amount of data, allowing correlations to be found to spot business trends, determine quality of research, prevent diseases, link legal citations, combat crime, and determine real-time roadway traffic conditions. As of 2012, limits on the size of data sets that are feasible to process in a reasonable amount of time were on the order of exa-bytes of data. Scientists regularly encounter limitations due to large data sets in many areas, including meteorology, genomics, connectomics, complex physics simulations, and biological and environmental research. The limitations also affect Internet search, finance and business informatics. Data sets grow in size in part because they are increasingly being gathered by ubiquitous information-sensing mobile devices, aerial sensory technologies (remote sensing), software logs, cameras, microphones, Radio Frequency Identification (RFID) readers, and wireless sensor networks. The world's technological per-capita capacity to store information has roughly doubled every 40 months since the 1980s; as of 2012, every day about 2.5 quintillion ( ) bytes of data have been created. Big data is difficult to work with using relational databases and desktop statistics and visualization packages, requiring instead "massively parallel software running on tens, hundreds, or even thousands of servers". What is considered "big data" varies depending on the capabilities of the organization managing the set. For some organizations, facing hundreds of gigabytes of data for the first time may trigger a need to reconsider data management options. For others, it may take tens or hundreds of terabytes before data size becomes a significant consideration. Examples Examples include web logs, RFID, sensor networks, social networks, social data (due to the social data revolution), Internet text and documents, Internet search indexing, call detail records, astronomy, atmospheric science, genomics, biogeochemical, biological, and other complex and often interdisciplinary scientific research, military surveillance, medical records, photography archives, video archives, and large-scale e-commerce. Dimensions of Big Data (4 V s) Volume: Enterprises are awash with ever-growing data of all types, easily amassing terabytes even petabytes of data. Velocity: For time-sensitive processes such as catching fraud, big data must be used as it streams into the enterprise in order to maximize its value. Variety: Big data may be any type of data - structured and unstructured data such as text, sensor data, audio, video, click streams, log files and more. New insights are found when analyzing these data types together. Veracity: 1 in 3 business leaders don t trust the information they use to make decisions. How can you act upon information if you don t trust it? Establishing trust in big data presents a huge challenge as the variety and number of sources grows. DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-12. PAGE NO. Page 16 of 20

17 Technologies Big data requires exceptional technologies to efficiently process large quantities of data within tolerable elapsed times. Suitable technologies include A/B testing, association rule learning, classification, cluster analysis, crowd sourcing, data fusion and integration, ensemble learning, genetic algorithms, machine learning, natural language processing, neural networks, pattern recognition, anomaly detection, predictive modeling, regression, sentiment analysis, signal processing, supervised and unsupervised learning, simulation, time series analysis and visualization. Additional technologies being applied to big data include Massively Parallel-Processing (MPP) databases, search-based applications, data-mining grids, distributed file systems, distributed databases, cloud based infrastructure (applications, storage and computing resources) and the Internet. The practitioners of big data analytics processes are generally hostile to slower shared storage, preferring Direct-Attached Storage (DAS) in its various forms from Solid State Disk (SSD) to high capacity SATA disk buried inside parallel processing nodes. The perception of shared storage architectures SAN and NAS is that they are relatively slow, complex, and expensive. These qualities are not consistent with big data analytics systems that thrive on system performance, commodity infrastructure, and low cost. Big Data: Big Opportunities bring unprecedented business opportunity. organizations can improve operational efficiency, reduce data management costs, faster decision making better manage brands and customer relationships. next frontier for innovation, competition and productivity Big Data: Big Problem Lack of skill / expertise for analysis of data Too difficult to access all data for analysis All data may not be considered for decision making Consumer privacy specially Personally Identifiable Information (PII) may be threatened Big Data Solutions World wide well-known big data solutions are: Oracle Big Data Appliance IBM Big Data Solutions (Hadoop based) Microsoft Big Data Solutions Informatica Bigdata Research activities In March 2012, the White House announced a national "Big Data Initiative" that consisted of six Federal departments and agencies committing more than $200 million to Big Data research projects. The initiative included a National Science Foundation "Expeditions in Computing" grant of $10 million over 5 years to the AMP Lab at the University of California, Berkeley. The AMP Lab also received funds from DARPA, and over a dozen industrial sponsors and uses Big Data to attack a wide range of problems from predicting traffic congestion to fighting cancer. The U.S. state of Massachusetts announced the Massachusetts Big Data Initiative in May 2012, which provides funding from the state government and private companies to a variety of research institutions. The Massachusetts Institute of Technology (MIT) hosts the Intel Science and Technology Center for Big Data in the MIT Computer Science and Artificial Intelligence Laboratory combining government, corporate, and institutional funding and research efforts. Last but not the least Whether big data becomes your organization s greatest asset or one of its gravest liabilities depends on the strategies and solutions you put in place to deal with the epic growth in data volume, complexity, diversity and velocity. DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-12. PAGE NO. Page 17 of 20

18 Revisiting Basics Three decades of banking reforms Prior to the initiation of reforms in the 1980s, Bangladesh's financial system constituted typical examples of what economists dubbed 'financial repression'. The system, both the market and institutions, in the post-independence period faced major structural problems, evident both in banking and other components of the money market as well as the capital market. To overcome these problems, the financial sector reform was initiated in 1982 with the denationalisation of commercial banks, followed by the establishment of the National Commission on Money, Banking and Credit in However, major reforms in the sector were launched in the early 1990s. Banking is a dominant subsector of the country's financial system that underwent massive reforms. The reform programmes initiated under various auspices focused on several dimensions, most notably privatisation of stateowned commercial banks (SCBs), and entry of new private and foreign banks. The other areas of focus were recovery of non-performing loans (NPL), interest rate deregulations, central bank's increased autonomy, enhancing prudential regulation and supervision, rationalisation and merger of bank branches and improvements to the money market. Given the changing perspective towards denationalisation and private participation, the initial phase of banking reform ( ) focused on the promotion of private ownership of commercial banks and denationalisation of nationalised commercial banks (NCBs). While donors supported denationalisation from the very beginning, the compulsion to adopt reform measures was not strong until the mid-1980s. As the weakness of the sector exposed, the government transferred three nationalised commercial banks in the private sector during and four private commercial banks were granted licences in the early 1980s. This round of reform, however, was largely unsuccessful due to the unprecedented influence of vested private commercial banks (PCBs) and NCBs' interest groups, which resulted in a loan default culture. Given the poor outcome of earlier reforms, wide-ranging banking reform measures were undertaken under the aegis of the World Bank's Financial Sector Reform Project (FSRP) in the 1990s. The focus of reforms, among others, has been on gradual deregulations of the interest rate structure, providing market-oriented incentives for priority sector lending and improvement in the debt recovery environment. Moreover, a large number of private commercial banks were awarded licences in the second phase of reforms. Although second generation banks have addressed many demand side issues, such as, development of a wide range of financial products and services, the measures have not been successful in addressing the banking sector's key problems. These include high NPL ratios both in state banks and private banks and a lack of enforcement of the capital adequacy and other regulatory requirements. While the issue of regulation and supervision was spelled out in FSRP and the banks adopted Basel I norms (maintaining adequate capital to withstand crisis) in 1996, it was indeed the reforms in post 2000 that had a de facto focus on risk-based banking supervision. Moreover, the Central Bank Strengthening Project initiated in 2003 focused on effective regulatory and supervisory system for the banking sector, particularly strengthening the legal framework, automation and human resource development and capacity building of the BB. The Enterprise Growth and Bank Modernisation Project was adopted in 2004 by the WB to help the government achieve a competitive private banking system through a staged withdrawal through divestment and corporatisation of a substantial shareholding in the three public sector banks (Rupali, Agrani and Janata), and divestment of a minority shareholding in the largest state bank, Sonali. Outcome: The banking sector reform faced a strong resistance from organised labours, but political support favoured various reforms in the sector as the entry of private players provided them with considerable incentives. The share of nationalised banks' in total banking assets and deposits has declined over the years. Even in the early 2000s, the NCBs/SCBs constituted 47 percent of industry assets and half of the industry deposits. However, the private commercial banks (both local and foreign) emerged as a dominant player in the sector constituting 65 percent of industry assets. However, the first two phases of reforms did not bring any measurable outcomes, highlighting the fact that wholesale liberalisation without instituting an effective regulatory structure is not the answer to the cumulative problems of DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-12. PAGE NO. Page 18 of 20

19 bank nationalisation. Nevertheless, the sector turned around in the early 2000s when the focus was shifted to risk-based regulations and supervisions. Moreover, there has also been a strong public opinion against the defaulters, which along with political commitments facilitated enactment of a number of new laws, regulations and instruments to curb NPLs. Depth in banking assets is reflected in rising share of deposits, private sector credit and broad money in proportion to GDP. Access to banking services is on the rise, reflected in branch expansion and firms' access to credit, including BB's financial inclusion programmes. While high interest spread is a drawback, other indicators of efficiency in the sector, such as return on assets and return on equity, are favourable. Finally, asset quality, capital adequacy ratios, probability of default, among others, that indicate banking sector stability suggest that private sector banks in Bangladesh are fairly stable. The most important development in 2000s has been the banks, notably private banks' commitments towards the implementation of Basel II, in which banks are required to maintain a Capital to Risk-Assets Ratio of 10 percent. Governance challenges: While the reforms' success, notably in the post-2000s, is largely due to better performance of private sector banks that account for nearly 65 percent of banking industry assets, nearly a third of the sector (SCBs and development finance institutions) is ailing. The SCBs' performance has not improved in line with reform objectives, largely owing to political interventions. Moreover, the autonomy of BB has been curtailed by instituting the Banking and Financial Institution Division in the finance ministry in 2009, which has been an obstacle in monitoring of SCBs by the central bank. As the public banks are not within the de facto purview of the supervision of the BB, their weak compliance with prudential regulations is a serious risk to the stability of the banking system. The recent SCB scams indicate that the success of reform could be reversed if politicians and their aligned business groups find room to channel the outcome entirely in their favour. The reform experience in the banking sector also offers a broad lesson for other segments of the financial system that without instituting an effective regulatory architecture, market based reforms could do more harm than good -- the lesson thousands of investors learnt, albeit painfully, during the two episodes of stockmarket crashes. Going forward, the banking sector needs to address a number of challenges with regards to high interest spreads, money market volatility, balance sheet problems of SCBs, central bank's autonomy, political interference in allocation of credit and overall governance problems. Moreover, the sector still has much to catch up with regard to financial innovation. The immediate challenge nevertheless is to reestablish BB's greater control over SCBs, dismantling the Banking and Financial Institution Division. Source: The Daily Star DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-12. PAGE NO. Page 19 of 20

20 Corporate activities during the month December 2012 IFIC Bank Opens 105th Branch at Konapara in Demra IFIC Bank s Chairman of Executive Committee of the Board of Directors Mr. Mohammad Lutfar Rahman inaugurated the 105th Branch at Konapara in Matuail under the Demra Police Station. Member of the Board of Directors Mr. Monirul Islam, Managing Director of the Bank Mr. Shah A Sarwar, top executives and local dignitaries attended the inaugural ceremony. Syed Shamsul Haq and Faruq Mainuddin received IFIC Bank Shahitya Puroshkar Information Minister Mr. Hasanul Haq Inu and Governor of Bangladesh Bank Dr. Atiur Rahman handed over the IFIC Bank Shahitya Puroshkar 2011 to the winners as the Chief Guest and Special Guest respectively. Presided over by Chairman of IFIC Bank Mr. Salman F Rahman, the programme was attended, among others, by President of FBCCI Mr. Kazi Akramuddin Ahmed and Managing Director of IFIC Bank Mr. Shah Alam Sarwar. 106th Branch of IFIC Bank opened at Birol, Dinajpur The 106th Branch of IFIC Bank was opened at Birol in Dinajpur district. Deputy Managing Director (Operation) of the Bank Mr. Wakar Hasan, First Vice President Mr. Zulfiquar Ali Khan, other senior officials and local dignitaries attended the inaugural ceremony. DHAKA) ON CURRENT FINANCIAL AFFAIRS: VOLUME-13, NO.-12. PAGE NO. Page 20 of 20