Asset recovery key to bank bailout success: BAB

The Bangladesh Association of Banks (BAB) has welcomed the government’s effort to recapitalise banks by spending over Tk 40,000 crore in the current fiscal year, but said the move needs to be matched by swift legal recovery of misappropriated assets for lasting effects.

Finance Minister Amir Khosru Mahmud Chowdhury disclosed the figure in his budget speech on Thursday, saying the government had committed the funds to restore the financial health of weak banks.

In a statement on the proposed budget, the BAB, which represents bank sponsors, demanded decisive enforcement against wilful defaulters and transparent treatment of shareholdings acquired through irregular means.

“Depositors’ confidence rests on accountability. Further, there should have been a dedicated budgetary allocation for establishing an Asset Management Company (AMC) to clean up the balance sheets of weak banks, reduce their non-performing loan burden and ease capital shortfall challenges across the sector,” said BAB Chairman Abdul Hai Sarker.

The association of private commercial banks stressed the need to match ambition with discipline and accountability.

“This is a budget of ambition and direction -- one that rightly understands a simple truth: there can be no strong economy without strong banks, and no strong banks without trust,” the association said.

It also welcomed risk-based supervision, the removal of undue influence, the development of bond markets, and the move towards a digital, cashless economy.

The proposed bank resolution framework should include clear safeguards to ensure that parties whose conduct contributed to the distress of financial institutions cannot re-enter the system, it added.

The association stressed that government borrowing from the private banking system should remain disciplined so that it does not crowd out private-sector credit, on which investment, exports and employment depend.

“Private credit must be protected,” the BAB chairman said.

The association called for fiscal policy to reinforce capital rebuilding and prevent its erosion, and said dividend taxation should not discourage institutional investment in the capital market.

The trade body further demanded that provisioning shortfalls should, over time, be treated outside taxable income and that the transition to a cashless, digitally inclusive economy must receive adequate fiscal support.