In a statement on Saturday, the anti-graft watchdog denounced the move as “immoral and fraudulent” and said it will raise questions about the central bank’s credibility in terms of establishing discipline and governance in the financial sector.
The central bank also risks tarnishing its image around the world, according to TIB.
The government approved the Farmers Bank, owned by Muhiuddin Khan Alamgir, an Awami League Presidium member, in 2013. He resigned as chairman following pressure over loan scams and irregularities in 2017.
Chowdhury Nafeez Sarafat, the chairman of RACE Asset Management Ltd, who also heads the board of trustees of the Canadian University of Bangladesh, took over as chairman of the bank in early 2018 before it was rechristened Padma Bank the following year apparently to restore its image.
State-owned Sonali Bank, Janata Bank, Agrani Bank, Rupali Bank, and the Investment Corporation of Bangladesh injected into the troubled private bank Tk 7.15 billion, or 66 percent of its capital, at that time in a move to stop it from going bankrupt.
Struggling to continue operations having been paralysed by a liquidity crisis, the bank knocked on the government’s door to bail it out either through a merger with or an acquisition by a state-owned bank.
Finance Minister AHM Mustafa Kamal later said the government would take a decision after the banking company law was amended.
“Bangladesh Bank has agreed to create a separate account for the troubled Padma Bank by keeping the information of the bank’s financial losses hidden, as per the terms of the consultancy firm DelMorgan, to bring in $700 million worth of foreign investment, which is to be adjusted from the bank’s profits over the next 10 years,” said TIB Executive Director Iftekharuzzaman.
He labelled the “unethical” advantage given by Bangladesh Bank as “unprecedented” in the banking sector.
Despite receiving various forms of policy assistance from the government, the embattled bank has failed to turn its fortunes around but has instead incurred even heavier losses, according to Iftekharuzzaman.
“In such a situation, the bank’s attempt to clear its financial statement by omitting the losses is not only unethical but also fraudulent.