Bangladesh Bank asks six banks to explain extra profits from US dollar sales

BB says the banks will find out the people involved in making excess profits

Published : 18 August 2022, 03:46 PM
Updated : 18 August 2022, 03:46 PM

The Bangladesh Bank has asked six banks for an explanation after “finding evidence” that they raised the price of the US dollar by keeping more greenbacks than necessary.

Central bank spokesman Md Serajul Islam said they sent out notices to the banks on Wednesday.

“The banks will primarily find out the people involved in making extra profits from dollar sales. We’ve asked for an explanation from the managing directors of five local banks and a foreign one,” he said.

The central bank did not officially reveal the names of the six banks. After the Bangladesh Bank ordered the six banks to remove their treasury chiefs recently, learnt about them from officials who requested to be anonymous as they were not authorised to speak to the media.

Banks that made excess profits through the treasury operation are BRAC Bank, City Bank, Prime Bank, Dutch Bangla Bank, Southeast Bank and Standard Chartered Bank.

“No comments,” said Selim RF Hussain, the MD of BRAC Bank and chairman of the Association of Bankers, Bangladesh, in a text message.

Naser Ezaz, the CEO of Standard Chartered Bank, also responded in a text message, saying he will not comment on “any issue under investigation” as per the bank’s rule.

The MDs of the other banks did not respond to phone calls or messages.

Earlier this month, the Bangladesh Bank directed the six banks to remove their treasury chiefs. The banks did not respond to requests for comments at that time.

The national bank capped the gap between the buying and selling rates of the dollar against the taka earlier this week.

The difference between dollar buying and selling rates was locked at Tk 1 for the banks and at Tk 1.5 over the banks’ selling rate for the foreign exchange companies.

Foreign exchange reserves in Bangladesh slipped below $40 billion in July from $45.51 billion a year earlier. The government has announced a series of austerity measures, including curbs on the imports of luxury goods, to preserve dollars.

Bangladesh Bank also increased surveillance over the open market along with the banks in an effort to stay on top of the spiking dollar exchange rate.

It has punished errant bankers and merchants, but the crackdown seemed to have no effect on the market, as the price of the greenback continued to rise in the open market.

The clampdown stoked fears among unlicenced traders. The dollar shortage put an unofficial limit on the size of transactions by the authorised companies and banks.

Despite the ongoing efforts, the dollar’s price has risen in the span of a few days. In May, it was sold at Tk 102 before falling to Tk 98-99 and settling for some time. However, the rate surged past Tk 100 in the middle of July once again before reaching at an all-time peak of Tk 121 on Aug 11.

But show-cause notices to dozens of money exchange companies and cases against at least 11 others stirred up the open market.

On Tuesday, the central bank lowered the interest rate for short-term investment in foreign currency by 50 basis points, allowing banks to offer a maximum interest rate of LIBOR plus 3 percent instead of 3.5 percent.

The decision will allow the exporters, those from the garment sector in particular, to borrow money from banks at lower interest rates.

Toufique Imrose Khalidi
Editor-in-Chief and Publisher