Southeast Bank under BB scanner

Bangladesh Bank (BB) has brought Southeast Bank (SEBL) under an 'early warning system', a method that alerts a bank when its performance goes below satisfactory level.
To closely monitor the bank activities, Abdur Rahim, general manager of foreign exchange investment department of the central bank, has been made the SEBL observer.
The bank's default loans increased by 74 percent to Tk 433 crore at the end of September 2009, which was only Tk 248 crore at the end of December 2008.
However, Mahbubul Alam, SEBL managing director, claimed a significant improvement in his bank performance, which went unnoticed by the central bank.
Along with default loans, some other performance indicators of SEBL were not in line with BB's rating, central bank officials said.
SEBL disbursed a large sum of loans to three of its clients a few years back, bypassing the bank's traditional process. In an investigation, BB foun around Tk 200 crore as classified loans.
BB usually treats a bank as a problem bank when its performance drops. But before branding it as a problem bank, the central bank brings the bank concerned under the 'early warning system' to monitor its activities.
The SEBL MD said the central bank issued the warning notice based on SEBL's performance until March 31. "But if the central bank considers our present performance, it will find a different scenario."
"Our default loans against total outstanding came down to 7 percent, which was 14 percent in March. We have no shortfall in provision or liquidity crisis."
SEBL earnings also increased in the meantime and its operating profit is expected to reach Tk 400 crore by yearend, he said.
Regarding irregularities on providing loans to the three clients, he said SELB regularised loans worth Tk 100 crore of one client recently under the government's direction that was announced because of the global economic crisis.
Another client, who took Tk 70 crore, failed to begin its production unit due to a gas crisis. The prime minister recently directed concerned authorities to provide gas to such industries. "We hope to recover money from the client after gas is supplied to the client's production units."
The third client, Alam said, took Tk 30 crore. “It is now being rescheduled.”