Three more banks face asset quality review

Asset quality review (AQR) of three more banks—IFIC, National, and AB—began yesterday as part of the central bank's latest move to conduct forensic asset audits of problematic financial institutions.

A team of officials from Deloitte Malaysia, a global firm that will audit the three, visited the headquarters of IFIC yesterday.

"We welcome the audit," Md Mehmood Husain, independent director and chairman of IFIC Bank, told this correspondent.

"A team from the audit firm met with us and will start their work soon, and it will likely take nearly three months to complete the audit," he added.

The financial indicators of IFIC Bank are improving, he said, adding that the liquidity position of IFIC is good now and the advance-to-deposit ratio is coming down to the regulatory parameter, which was high earlier.

"Now we are focusing on loan recovery," he added.

The Asian Development Bank (ADB) is providing funds to conduct the asset review of the three banks.

After the completion of asset reviews of six banks, the banking sector reform task force in July this year decided to include 11 more in the list.

The 11 are: Islami Bank Bangladesh, Al-Arafah Islami Bank, National Bank, Bangladesh Commerce Bank, United Commercial Bank, IFIC Bank, AB Bank, Premier Bank, NRB Commercial Bank, NRB Bank, and Meghna Bank.

The World Bank is also extending financial support along with the ADB for the reviews.

The newly formed Bank Restructuring & Resolution Unit is now working on this issue.

To ensure a proper audit, Bangladesh Bank has assigned a dedicated official as a focal point for each bank, BB officials said, adding that each audit firm will also have a designated official responsible for the task.

Central bank officials said the issues to be included in the AQR process have been specified.

These include financial policies, asset risk and valuation, internal control policies, loan classification, and rescheduled loans, they added.

In addition, policies related to single borrowers and large loan limits, major defaulting borrowers, and the assessment of accounting policies and internal control systems of banks to reduce other credit risks will be reviewed.

Liquidity and investment policies will also be evaluated in line with existing regulations.

The first set of six banks was audited by global audit firms Ernst & Young and KPMG.

Ernst & Young reviewed the asset quality of EXIM Bank, Social Islami Bank, and ICB Islamic Bank, while KPMG carried out the assessments for First Security Islami Bank, Global Islami Bank, and Union Bank.

These banks are among those frequently named for various irregularities and fraud during the previous government's tenure.

Asset quality review reports of those six banks showed that they are in a dire financial state, with non-performing loans skyrocketing to four times higher than previously reported.