IMF mission to gauge stock impact on banks

An International Monetary Fund (IMF) team will seek details from the central bank about the impact of commercial banks' involvement in the stockmarket on their organisational health.
Led by IMF's senior official David Cowen, the mission is due to arrive in Dhaka next week and will also finalise a set of conditions attached to the $1 billion credit to Bangladesh.
The mission will hold talks with the high officials of the finance division, National Board of Revenue, Bangladesh Bank and other agencies, during the March 8-18 visit.
According to the IMF, the outcome of stockmarket development and policy intervention in the banking sector, soundness and capital adequacy and enforcement of existing regulations on a bank's equity share holdings are among the issues to be discussed.
The mission had earlier visited Bangladesh twice to discuss credit issues. On those visits, it had opposed banks' involvement in the share market and supported BB's steps to cut their excessive exposure to stocks.
After its visit in December last year, the IMF mission in a press statement said the central bank should continue to strengthen its supervision on the banking system.
IMF also advised BB to focus on improving the financial conditions of state-owned commercial banks and ensure that all banks comply with the new capital adequacy requirements.
The lending agency said Bangladesh Bank should continue working in tandem with the Securities and Exchange Commission to ensure that banks and their subsidiaries take necessary actions to mitigate risks arising from stockmarket volatility.
IMF has already set 10 conditions which the government must fulfil to receive the loan amount for the first year. The conditions include withdrawal of the ceiling on lending rate and reduction of loss incurred by three major state-owned enterprises.
The IMF mission will also discuss the timeframe for the government to withdraw the ceiling on lending rate. Progress on conducting audits into the state-owned banks by international auditors and reforms of the banking law will also be discussed.
These steps aim to cut the losses of state enterprises by increasing prices of power, petroleum and fertiliser.
A finance ministry official said the government has agreed in principle about these conditions and started taking steps to implement some.
If these issues are finalised during the mission's visit, it may forward the loan proposal to the IMF's board by the end of this month or the beginning of the next month, the official said.