Using public’s money for vested interests

Time and again, we have seen how company boards manipulate financial dealings for personal benefits, and Sikder Insurance investing most of its assets in the scandal-ridden National Bank Ltd (NBL) is just the latest example. Despite breaching multiple regulations, the insurer has received approval from the Bangladesh Securities and Exchange Commission (BSEC) to raise funds from the public. To this end, the rating agency, auditor, and Insurance Development and Regulatory Authority (IDRA), all ignored the inconsistencies to give Sikder Insurance the green light. All these highlight the level of irregularities plaguing the financial sector.

According to regulations, an insurer can invest a maximum of 25 percent of its funds in stocks, but Sikder Insurance has injected 72.8 percent of its funds into the stock market. To make matters worse, 99.9 percent of the funds have been invested in NBL, which is mired in financial crisis. Meanwhile, IDRA rules stipulate that a non-life insurance company cannot invest more than five percent of its assets in a single stock.

While Sikder Insurance has actively manipulated financial dealings, all other parties are culpable for looking the other way. A rating agency attached a higher credit rating to the insurance company, while the auditor and IDRA did not object to the breaches. These combined have allowed such a dubious insurer to go for an initial public offering.

There should be no financial incentive to invest in NBL. As of September 2023, the bank's total bad loans stood at Tk 13,514 crore, the highest among private banks in Bangladesh. It was unable to provide any dividends in 2021 and 2022, as it was reeling from huge losses—Tk 1,123 crore in the first nine months of 2023 and Tk 3,260 crore in 2022. And yet, apart from the aforementioned gambles, Sikder Insurance kept most of its fixed deposits in the ailing bank.

It is, however, clear why the insurer took such decisions. Till December 21 this year, four members of the Sikder family were on the bank's board, and this overwhelming investment was made to retain the family's control in the bank. Unsurprisingly, two members of the Sikder family, which controls NBL, are also owners of Sikder Insurance.

While Sikder Insurance has actively manipulated financial dealings, all other parties are culpable for looking the other way. A rating agency attached a higher credit rating to the insurance company, while the auditor and IDRA did not object to the breaches. These combined have allowed such a dubious insurer to go for an initial public offering. We urge regulators to thoroughly investigate this matter and hold all related organisations accountable, for the sake of people's hard-earned money.