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BB to monitor big cos’ business performance

AKM Zamir Uddin

Bangladesh Bank will monitor business performances of the country’s big corporate groups and companies in a bid to secure stability in the financial sector, said officials of the central bank.
A BB official told New Age on Tuesday that the central bank had already started formulating policies to bring the big corporate groups under its watch system.
The BB will select 40 to 50 large corporate groups and will set separate recommendations for the groups considering their business risks.
As part of the move, the BB governor Atiur Rahman at the latest monetary policy unveiling session urged the corporate and conglomerate groups to go to the capital market to collect their required equity to mitigate risks in the banking sector.
The move will free up the banking system’s resources for small borrowers and help banks reduce risks involved with large concentrations of money in a few businesses.
The big corporate groups of any country are mainly responsible for financial crisis as financial institutions like banks and non-bank financial institutions fall in danger if any big corporate group faces difficulties, the BB official said.
The majority of the big corporate groups in the country are now top borrowers in the banking sector.
The BB has taken the step to assess the risks to the banking sector from big exposures when more than 20 banks incurred huge losses after financing the Chittagong-based corporate groups, the official said.
The central bank will collect the business statements of the corporate groups from banks, NBFIs, the capital market and other financial regulators to scrutinise their (corporate groups) business performances.
‘For an example, some corporate groups have now high single borrower exposures with a number of banks. Against the backdrop, the central bank will scrutinise qualities of the assets which were disbursed to the groups,’ he said.
According to Bank Company Act 1991, the outstanding amount of borrowing exposure, both funded and non-funded loans, to a single person, counterparty or a group will not exceed 35 per cent of the capital of a bank.
The BB will monitor the market products of the corporate companies in a bid to understand their original branding reputation.
Besides, the central bank will supervise foreign business of the corporate companies including borrowing from the foreign sources.
Some corporate groups have recently taken huge amount of foreign loans, so the central bank will monitor whether the trend (taking huge amount of foreign loans) would create any risk to the country’s financial sector, the official said.
The BB will issue early warning alert to the lender banks and NBFIs if any borrower corporate group falls in trouble, the BB official said.
Under the circumstances, banks and NBFIs will be able to take early measures to avoid any debacle.
The central bank’s monitoring system on the corporate groups is a new idea for the BB but central banks of the developed countries have already been overseeing their big corporate groups, another BB official said.
He said the BB would start its monitoring of the corporate groups within the next two or three months.

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