Banking system – I Have 50 Dollars Tue, 28 Dec 2021 12:12:52 +0000 en-US hourly 1 Banking system – I Have 50 Dollars 32 32 Banking System Loan Restructuring Reaches All-Time High | Stockwatch Mon, 27 Dec 2021 05:06:24 +0000

Loan restructurings in the Cypriot banking system reached nearly € 2 billion in the first ten months of 2021, marking the highest figure according to Central Bank of Cyprus (CBC) files which began in late 2014 .

According to CBC data, restructured loans at the end of October reached 1.98 billion euros, as banks accelerate loan restructurings after the end of the late 2020 payment holiday imposed due to the Covid pandemic. The Cypriot payment holiday was considered the largest in the euro area, affecting loans totaling 11.7 billion euros both in the banking system and in credit acquiring companies.

The vast majority of restructured loans concerned loans to businesses (up to and over 1 million euros) which at the end of October amounted to 1.7 billion euros, or 85% of the total restructurings, according to the reports. data from CBC.

By category, restructurings of loans to companies exceeding 1 million euros have the highest share with 1.5 billion euros, ie 74% of total restructurings. Home loans come in second with restructured loans for 188 million euros at the end of October, closely followed by business loans up to 1 million euros with restructurings for 187 million euros.

Restructuring of other loans amounted to 63 million euros while restructured consumer loans amounted to 29 million euros.

Business loans represent the majority of loans in the banking system, with outstanding business credit facilities at end-August 2021 (latest data) amounting to € 14.7 billion, or 52% of total loans, while that EUR 9.5 billion concerned small and medium-sized enterprises. large companies.

The Covid has accelerated restructuring

CBC data shows banks accelerated post-payment holiday restructuring following repeated calls by the central bank governor to commercial banks to address challenges facing households and businesses in due to the Covid pandemic.

Loan restructurings at the end of October 2021 show an increase of 162% compared to 2020 when renegotiated loans amounted to € 754.4m, while pre-Covid restructurings were even less.

In 2019, total loan restructurings amounted to € 576.5 million while the previous year was limited to € 324 million. In 2017, loan restructurings amounted to € 588 million, while in 2017 and 2016, loan restructurings exceeded € 1 billion, amounting respectively to € 1.28 billion and 1.27 billion euros.

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Analysis: Problem banks and governance in the banking system Sat, 18 Dec 2021 13:48:48 +0000

This is part of a special series that offers a retrospective look at Bangladesh’s financial sector

This article continues on the issue of governance of the banking system.

The first article described how the banking system operates under the guidance and regulation of the Bangladesh Bank in the management of non-performing loans.

The second article dealt with the role of the board of directors of the commercial bank in governance.

This article discusses the issue of troubled banks and how the central bank can tackle these banks.

The management by the Bangladesh Bank of the private banking sector over the next two years is a matter of great importance for the functioning of the economy and the maintenance of rapid economic growth.

The essence of economic growth is to direct savings towards the most profitable investment projects.

The banking system is the key organization in which such decisions and connections are made.

In recent years, the efficiency of the private banking system has declined, in part due to excessive tolerance.

Distressed banks have one or more of the following conditions:

· Depositors have difficulty withdrawing their funds on demand.

· The bank has an increasing level of nonperforming loans.

· The bank is unable to maintain the required capital and is not making any progress in correcting this condition.

· There is a slow decline in the level of deposits.

· The bank is having difficulty borrowing in the day-to-day interbank market.

Problem banks emerge from making poor quality loans or breaking the rules:

Loans are made to people of bad character, usually partners of an administrator

Loans granted to relatives of an administrator

Scams where loans are given to non-existent businesses

Inadequate collateral due to loan officer laziness or willful deception

Weak loan recovery procedures

· Failure of loan officers to maintain regular contact with borrowers; or the lack of collection of appropriate information on the financial situation of the borrower.

Competent staff following appropriate procedures will report problem loans allowing the bank to take corrective action.

Poor loan portfolios can only come from the weakness of senior management or administrators who have an interest in a loan defaulting.

Also Read – A Retrospective Look at Bangladesh’s Financial Sector

Also Read – A Retrospective Look at Bangladesh’s Financial Sector: Part 2

Also Read – A Retrospective Look at Bangladesh’s Financial Sector: Part 3

Read also – Analysis: Interest rates and deposits

Read also – The state of lending rates – Part 1

Read also – Analysis: The state of lending rates – Part 2

Read also – Ever higher NPLs and bankers’ dilemma

Read also – The dilemma of NPL management

Also Read – A Retrospective Look at Exchange Rate Management in Bangladesh

Also Read – Summarizing Four Relevant Problems

Read also – Governance in the banking system

Read also – Analysis: The board of directors of the bank – governance of the banking sector

When a bank begins to show signs of a poor portfolio, the central bank should take immediate action to demand improvements and carefully monitor the actual capital position of the bank.

It is not the job of the Bangladesh Bank to help a commercial bank use cover-ups and forbearance to cover up the problem.

Rather, it is the task of the Bangladesh Bank to demand and insist on corrective measures.

Falling capital is one of the most immediate signals for a bank in trouble.

Such a condition forces the directors of the troubled bank to take aggressive action to raise the necessary capital.

It is quite a difficult problem.

There are three sources of additional capital: Existing shareholders; the issuance of new shares or bonds to nationals; or sell stocks or bonds to foreigners.

Directors are still reluctant to dilute their holdings [reducing their dividends]; bond issuance is still in its infancy and many questions remain unanswered.

The essence of bank capital is that when the bank loses money, the capital is reduced but the depositors’ money is protected.

The depositor only loses once the shareholders have lost all of their investment.

A perpetual bond that pays a fixed return regardless of the bank’s performance is not capital.

The owner of the bond can be protected against loss at the same level as the depositor.

Foreigners may very well be interested in acquiring a stake in a bank, but they will do so after due diligence involving the bank, its directors and senior management.

Most private banks will not present a convincing case.


If the directors are unable to correct the lack of capital, more vigorous action is needed.

The Bangladesh Bank will require the troubled bank to merge with another bank and the combined balance sheets provide the required capital.

Of course, this means that many people will no longer be directors and the owners of the weak bank will find their stocks to be of little value.

The Bangladesh Bank was generally looking for a way to merge the problematic bank.

This can be managed under existing securities laws, although there may be litigation to prevent such a merger.

One obvious problem is the slowness with which courts can deal with litigation; the troubled bank cannot continue for years to wait for the courts to settle the dispute.

I doubt the slowness of the courts can be improved, so merging a weak bank with a stronger bank is an unlikely fix to the problem.

The only other way is for Bangladesh Bank to take over the problem bank and find a way for its future.

If a bank reaches this point, depositors try to withdraw their funds and borrowers avoid repaying, so the condition of the bank deteriorates rapidly.

The main effort should focus on loan recovery. There are many things that can be done: All loans classified as impaired or uncollectible must be collected in court.

The CIB must confirm that all these borrowers are listed and BB must inform all banks that no credit can be given to defaults.

Problem bank records should be reviewed to determine if there is inappropriate pressure from directors or senior management to issue loans that have been assessed as poor quality.

Any such example should be the basis for legal action to recover funds from the director or manager concerned.

The Bangladesh Bank should do everything possible to collect the loans.

Depositors must be reimbursed if they wish to recover their deposits, but early withdrawal of term deposits can be avoided.

The Deposit Insurance Fund can be used to reimburse depositors within the permitted limits.

The Bangladesh Bank will need to lend money to the ailing bank, but a vigorous cost-cutting program is expected to be implemented.

Loans that appear to be collectable can be restructured and rescheduled.

Within a reasonably short period of time, not exceeding 18 months, the condition and potential of the problematic bank can be reviewed and a decision made: (1) Close the bank; pay depositors where possible; establish a special unit at the Bangladesh Bank which will take charge of unpaid loans and make an ongoing effort to collect what is owed. (2) Bid the bank under the conditions: the winning bid takes the bank in the state it is in when the auction is announced; buyers will bring the bank to capital adequacy; all staff are made redundant and paid by BB.

The new owner will hire his own staff.

All funds loaned to the bank by BB will be repaid over a long period at a very low interest rate.

These conditions are intended to be illustrative but it is a question of going in one of two directions: closing or auction.

If the bank is closed, if there is value left after all the contributions have been paid [including any use of the Deposit Insurance], with uncollected loans valued at zero, the owners of the bank will receive their share of the remaining capital.

If the bank is auctioned off, the original owners will not receive anything.

There are at least two private banks that should be bought out in this way and sold by auction or closure unless a merger can be completed.

One action that should be considered is to change the size of deposits covered by insurance. Maybe deposits up to Tk10 lakh could be covered.

This would ensure 98% of deposit accounts and 33% of the value of deposits for private banks.

Of course, the premium must also be increased.

This would protect most depositors, reduce the risk of bank runs and stabilize private banks.

Forrest Cookson is an economist who was the first chairman of AmCham and was a consultant for the Bangladesh Bureau of Statistics

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Insurance Reforms Will Build Account Holders’ Confidence In Banking System, PM Modi Says Wed, 15 Dec 2021 06:41:57 +0000
File photo of PM Narendra Modi | Twitter / @ ANI

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New Delhi: Prime Minister Narendra Modi said on Sunday that the government-initiated deposit insurance reforms will build account holder confidence in the banking system.

In August, Parliament passed the Deposit Insurance and Credit Guarantee Company (Amendment) Bill, 2021, ensuring that account holders get up to Rs 5 lakh within 90 days of the RBI imposition of a moratorium on banks.

This was done with “Depositors First” in mind, Modi said while announcing that more than a lakh of depositors got around Rs 1,300 crore of their money from troubled banks over the past few years. last days with the enactment of legislation.

He assured that around three more lakhs of these account holders would soon get their deposits from banks under the RBI moratorium.

During an event here in Vigyan Bhawan, the Prime Minister said that banks play an important role in the progress of any nation.

“For the growth of banks, the security of depositors’ money is crucial… if we are to save the banks, we must provide security to depositors,” he said.

Deposit insurance covers all deposits such as savings, fixed, current and recurring deposits in all commercial banks. Deposits in state, central and primary cooperative banks operating in states and Union territories are also covered.

With deposit insurance coverage of Rs 5 lakh per depositor and per bank, the number of fully protected accounts at the end of the previous fiscal year represented 98.1% of the total number of accounts compared to the international benchmark of 80 %.

Read also : PM Modi’s Twitter account ‘briefly compromised’, tweets Bitcoin is now legal tender

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