Staff Correspondent

Ten banks of the country’s already limping financial sector have become particularly weak, but their former corrupt owners are out of reach more than four months after the fall of their allied regime.

While Salman F Rahman, a key figure in the ousted Awami League (AL) fascist government, has been arrested, other heavyweights of the “launderers club” like Saiful Alam, Saifuzzaman Chowdhury and AHM Mustafa Kamal are yet to be pinpointed.

This cohort massively embezzled banking sector funds before siphoning them off abroad, contributing to a weakening of the overall banking sector and leading to a loss of confidence among private sector investors, and diversion of their attention to neighbouring countries.

A White Paper drafting committee formed by the Prof Yunus-led interim government says that during the 15-year Awami League regime, $240 billion was laundered abroad from the banking sector.

But not only the aforementioned kingpins but also their collaborators including managing directors, government inspection officials, and central bank officials are roaming freely by switching sides following the fall of their preferred AL administration in a July-August mass uprising, according to a report by Bangla daily Kaler Kantho.

Some have even secured promotions, the daily reports.

While some junior officials have been dismissed over widespread irregularities and corruption in the banking sector, no significant action has been taken against senior officials involved in these issues.

On 19 August, 250 employees of Islami Bank were terminated, and on 31 October, 579 employees of Social Islami Bank were dismissed for using forged documents and irregular recruitment processes. Similarly, on 18 November, Union Bank dismissed 262 employees, and Bangladesh Bank halted the promotion of 219 employees of Bangladesh Commerce Bank due to allegations of misconduct. However, the major beneficiaries of large-scale loan scams have largely escaped punishment.

According to a member of the Banking Task Force, the ongoing crises are damaging the banking sector's reputation and sending negative signals abroad, which harms the country and benefits neighbouring nations.

Amid liquidity shortages and panic driven by exaggerated reports on social media, many customers have withdrawn funds unnecessarily. As a result, while some weaker banks struggled to return deposits, stronger banks experienced an influx of funds through new customer deposits. Analysts argue that media trials negatively impact the normal functioning of banks and exacerbate the crisis.

While a shortage of bank funds immediately harms business operations, in the long term, export earnings also take a hit. For example, from January to October 2023, Bangladesh's garment exports to the US dropped by 3.33%, while exports from India, Pakistan, Vietnam, and Cambodia surged. India, in particular, recorded a 35% increase in garment exports from April to October 2023.

Ten banks, plagued by corruption and irregularities, are now struggling to maintain customer trust. Some have had to borrow from other banks and rely on liquidity support from the central bank. Bangladesh Bank has provided technical, advisory, and liquidity assistance, including printing Tk22,500 crore and arranging loans of Tk6,850 crore from stronger banks.

A white paper by the central bank highlights that politically influenced lending, fraud, and financial scandals have turned the banking sector into a "black hole." A forensic audit of troubled banks is scheduled for January, focusing on their visible and hidden assets.

Notably, Islami Bank alone has been linked to suspicious transactions amounting to Tk1.5 trillion by S Alam Group. Preliminary estimates suggest over Tk3 trillion has been laundered through several banks, including Social Islami, First Security, Union, Global, and National banks. Investigations are ongoing to recover the laundered funds.

But, S Alam is not alone in the financial scam. With Awami League’s blessings a number of other corporate giants – Beximco, NASSA, Jemcon, Summit, Shikder – were also involved in the schemes, details of which would come to light following a thorough audit of the affected banks.

Senior bankers believe restoring customer confidence is key to reviving weak banks. However, examples of struggling banks recovering through assistance are rare in Bangladesh. Cases like Padma Bank, BDBL, and Bangladesh Commerce Bank highlight the challenges of recovery.

Moody's has downgraded Bangladesh's credit rating due to rising political risks and declining growth potential, indicating a weakening banking sector. In a vicious cycle, this downgrade further increases economic uncertainty and deters potential investors.