BASIC Bank still in financial pain

Auditor says the bank's financial statements didn't follow reporting standards properly

The financial statements of the troubled state-owned BASIC Bank do not give a "true and fair view" of the institution's health, according to an audit report.

ACNABIN, an audit firm, made the observation in its annual report on the bank for 2015.

The audit report also said the bank did not follow the country's financial reporting standards properly in preparing the statements.

"This observation has made the bank's board of directors angry on the auditor. Directors who are mostly government bureaucrats have asked the auditing firm to change its opinion, which according to them is severely adverse," said a top official of the bank requesting not to be named.

Amid this situation, the bank's board approved the report in its annual general meeting held at its headquarters on Saturday.

The board discussed the issue at the meeting and decided to seek clarifications from the audit firm, the official said.

The present board took over in July 2014 after the government resolved Sheikh Abdul Hye Bacchu-led board that disbursed around Tk 6,500 crore loans between 2010 and June 2014, mostly on forged documents and inflated mortgages.

The new board blamed the serious irregularities during the tenure of the previous management for the bank's worsening financial condition.

ACNABIN explained the basis of its adverse opinion on the bank's financial statements in the audited annual report.

As of December 31 last year, the bank's total loans and advances stood at Tk 12,880.7 crore, including Tk 3,610.65 crore in classified loans and advances.

The provisioning required for the classified loans and advances was Tk 1,762.16 crore, but the bank has kept Tk 177.32 crore, according to the report.

The report also shows that BASIC's total loans and advances include further classified loans of Tk 2,970.60 crore, which was reported in 2014 as blocked assets.

Over Tk 2,060 crore was needed to be kept aside for provisioning, but the bank kept Tk 221 crore.

Later in April last year, the bank managed to get Bangladesh Bank's approval to provide the deficit amount of provision in 10 years starting in 2015.

Altogether the bank's total classified loans and advances stood at over Tk 6,581 crore at the end of the last year, against which about Tk 3,823 crore of provisioning was required. But BASIC kept less than Tk 400 crore.

It also failed to make adequate provisioning on its other assets, according to the audit report.

The required provision for other assets as of December 31 last year was nearly Tk 158 crore, but the bank kept Tk 65 crore. Thus the shortfall was nearly Tk 93 crore.

However, the central bank gave the bank five years to meet this shortfall.

The bank is also struggling to provide the capital required for Basel III obligation and maintain the capital adequacy ratio (CAR). In both the cases, the bank's position is negative, according to the report.

At the end of December last year, the state-run bank required upwards of Tk 1,127 crore to fulfil the Basel III requirement. But the bank's capital was in the negative to the tune of over Tk 851 crore.

On the other hand, the required CAR of the bank has to be minimum 10 percent of its risk weighted assets, but its position is negative by 7.55 percent. The bank's CAR has been in the negative since December 31, 2013.  The government provided over Tk 1,200 crore to help the bank meet its capital deficit last fiscal year.


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