The New Nation - Internet Edition

OPTIMISTIC claims of developments in the banking sector have become questionable in the backdrop of the takeover last year of a private commercial bank, the Oriental Bank, by the Bangladesh Bank (BB) as it looked about to collapse. The takeover by the BB, for the time being, saved a tottering financial institution from closing down and hedged the interests of its depositors. But this form of a bail-out by the government of what is essentially a private failing, cannot be a shining example.

Banking rules followed in most countries would have allowed such a failed banking institution to meet its natural death. At any rate, now that BB has taken over the Oriental Bank out of a consideration of there not being panic in the money market, it should at least concern itself with what went wrong also in its own supervision mechanism that allowed the corruptions in the Oriental Bank to balloon out of proportions. Unbelievable and very shocking cases of what amount to defalcation of private deposits kept in this bank were detected only in the last minute.

But the pertinent question is, why it took BB authorities so long to find out that the rot in this bank that had reached such a state for taking action. Surely, the same did not happen overnight. Why they failed to take timely steps to prevent the slide long before it was brought to the brink of disaster? The central bank will absolve itself of the blame for not being proactive in its guardian-like role. It is thought by experts that ill developments such as the ones in the former Oriental Bank are also plaguing some other banks in varying degrees. Only more timely and decisive actions from BB can stop their rot from spreading dangerously further.