Picture: Collected
Five banks in financial distress have secured guarantees from the Bangladesh Bank to access liquidity support from the inter-bank money market. First Security Islami Bank, Global Islami Bank, Social Islami Bank, and Union Bank signed agreements with the BB recently, while National Bank signed earlier.
Following the formation of an interim government in August, the boards of these five banks were restructured. Mohammad Forkanullah, acting managing director of Social Islami Bank, mentioned that they signed the agreement with Bangladesh Bank and expect to receive liquidity support within three to four days. Social Islami Bank has also approached some state-run banks for assistance.
Seven restructured banks applied for the Bangladesh Bank guarantee after the new central bank Governor, Ahsan H Mansur, suggested this step. The BB governor clarified that the central bank would not print money for liquidity support but would allow banks to seek support from the inter-bank money market.
The banks that applied for the Bangladesh Bank guarantee include Islami Bank Bangladesh (Tk 5,000 crore), Social Islami Bank (Tk 2,000 crore), First Security Islami Bank (Tk 7,900 crore), Union Bank (Tk 1,500 crore), Global Islami Bank (Tk 3,500 crore), National Bank (Tk 5,000 crore), and Exim Bank (Tk 4,000 crore).
A senior central bank official, speaking anonymously, stated that Bangladesh Bank would issue guarantees on a case-by-case basis and not for the full amounts requested. The central bank will also sign agreements with Islami Bank Bangladesh and Exim Bank.
The agreements with the five banks include nine conditions, such as a 0.25 percent guarantee fee on the guaranteed amount, a three-month guarantee period, and repayment with profit after maturity. If the banks fail to repay, the liquidity provider banks can create 90-day forced loans.
The Bangladesh Bank can deduct funds from the banks’ current accounts if they fail to repay on time and impose an additional 2 percent interest or profit on the SLF rate.
If necessary, Bangladesh Bank can recover funds by selling the banks’ assets, bonds, and securities. The banks must provide information and documents to Bangladesh Bank, which can change the guarantee guidelines as needed.
The Chattogram-based S Alam Group previously dominated the boards of these banks, but their representatives were recently removed by the central bank.
