Chaos engulfs banking sector amid leadership void

Rafiqul Islam Azad: The country’s banking sector, often referred to as the “heart” of the economy, is currently facing severe turmoil. This crisis has been exacerbated by the absence of top bank officials, following the August 5 political upheaval when Prime Minister Sheikh Hasina fled the country amidst widespread student protests. As a result, even key figures such as the governor and deputy governors of Bangladesh Bank have not returned to office. The situation has left the sector without effective leadership, plunging both private and state-owned banks into disarray.

On Thursday, chaos was particularly evident in several private banks, including Islami Bank Bangladesh PLC, Social Islami Bank, and United Commercial Bank (UCB). At Islami Bank, Managing Director Mohammed Monirul Moula was barred from performing his duties, while two deputy managing directors of Social Islami Bank were forced to resign. The unrest at Social Islami Bank turned violent, with one official, Masud Mia, seriously injured by protesting employees. Meanwhile, at UCB, a human chain formed outside the bank’s headquarters, demanding changes to the board of directors. Similar calls for reorganization have been made at other private banks, including National Bank, Southeast Bank, and Al-Arafah Islami Bank.

Economists and industry experts warn that the banking sector, already weakened by widespread irregularities and corruption, is on the brink of collapse. The reckless issuance of loans has eroded the financial foundations of many banks, leaving them vulnerable. Experts stress that urgent action is needed to stabilize the sector. Failure to address the emerging chaos could lead to a catastrophic run on banks as panicked customers withdraw their deposits, potentially driving several banks into bankruptcy.

Dr. Ahsan H. Mansur, an economist and Executive Director of the Policy Research Institute of Bangladesh, emphasized the need for calm. “This is not the time for conflict. Irregularities and corruption must be addressed, but the manner in which the protests are being conducted is counterproductive. Complaints should be formally submitted to Bangladesh Bank. Once the new governor is appointed, the central bank will undoubtedly take stern action against any wrongdoing,” Mansur said. He also highlighted that Dr. Salehuddin Ahmed, a seasoned economist appointed to the interim government as Minister of Finance and Planning, will have the crucial task of stabilizing the central bank and, by extension, the broader banking sector.

The crisis at Islami Bank has been particularly severe since the fall of the Sheikh Hasina government. Protests by sacked and demoted officers have been ongoing since Tuesday, with many senior local officials declared persona non grata. The situation escalated when the bank’s Additional Managing Director, Qaiser Ali, was suspended and forced to resign on Wednesday. The following day, Managing Director Monirul Moula was prevented from working and forced to leave the bank amid protests from the staff. The protesting officials claim that since the bank’s ownership changed in 2016, numerous honest and efficient officers have been unjustly dismissed, while those responsible for financial mismanagement have been promoted. They have vowed to prevent these corrupt officials from continuing their work and have even barred employees hired since 2016 from entering the bank.

A senior bank official, speaking anonymously, expressed concern over the ongoing harassment of top officials. “The current method of dealing with these issues is not appropriate. There will be ample time to address the injustices and corruption. However, if Islami Bank collapses due to the ongoing chaos, it could have devastating consequences for the entire economy,” the official warned.

Social Islami Bank is also in turmoil, with former directors and shareholders demanding a restructuring of the board. On Thursday, a group led by former chairman Rezaul Haque and former directors Anisul Haque and Sultan Mahmud Chowdhury confronted current bank officials at the bank’s headquarters, leading to clashes. Several current shareholders, including Rezaul Haque, reportedly forced Deputy Managing Directors Abdul Hannan Khan and Mohammad Habibur Rahman to resign. Managing Director Zafar Alam was not present at the time.

Rezaul Haque, speaking to the media, alleged that the bank had been looted through corruption since 2017 when he and his associates were removed from the board under state pressure. “We want to restore the bank and bring it back to a stable position. Yesterday, one of our supporters was brutally beaten for joining our cause. We are calling on Bangladesh Bank to intervene and reconstitute the bank’s board,” he said.

Meanwhile, more than 150 shareholders of United Commercial Bank have launched a movement demanding the removal of former Land Minister Saifuzzaman Chowdhury and his family from the bank’s board. They formed a human chain outside the UCB headquarters in Gulshan on Thursday, accusing Saifuzzaman of money laundering and various financial irregularities.

Founded in 1983, UCB was initially led by Awami League leader Akhtaruzzaman Chowdhury of Chattogram. The Pertex Group’s MA Hashem was also heavily involved in the bank’s early days, with both families maintaining control until 2016. However, in 2017, MA Hashem and his family were ousted from the board, and Saifuzzaman’s wife, Rukmila Zaman, became chairperson. Despite her official title, the shareholders allege that Saifuzzaman has been the de facto head of the bank, leading to its current financial troubles. They claim that his leadership has been marred by rampant looting and corruption, and have submitted a petition to Bangladesh Bank, accusing him of accumulating Tk 1,888 crore in assets in the UK through illegal means.

In response to the protests, UCB Managing Director Arif Qadri told the media that he had spoken with the protesters, who demanded a restructuring of the board. “I assured them that their complaints would be presented to the board,” he said.