Board dissolved, MD removed

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The Bangladesh Bank (BB) finally dissolved the board of directors and removed the managing director of the Oriental Bank from office for a year yesterday for failure to run the bank.
The central bank yesterday sent the order to the Oriental Bank’s board of directors, saying that the decision has been taken to prevent unlawful activities and to safeguard the interest of the depositors.

The members of the dissolved board and the managing director, however, can appeal against the decision to the BB board.

Top officials of different private commercial banks, however, were not happy with the central bank’s action.

They said it should have dealt out exemplary punishment, given that there had been gross violations of banking rules by the Oriental Bank.

Asked about the private banks’ sentiment, a high official of the BB said they are still in the process of disciplining the board members and the managing director.

“Actions will be taken on the outcomes of the probe that is going on. If necessary, we will bring criminal charges against them,” he added.

On June 19, the BB appointed an administrator for the bank after issuing showcause notices to the board of directors for making the financial institute a problem bank with huge bad loans.

The central bank in its letter yesterday said in their replies to the showcause notices, the Oriental Bank board members have failed to justify their performances although they were given 27 days’ time in two phases.

The managing director has responded to the showcause notice by tendering his resignation, the central bank order said adding that he has brought up ’some irrelevant issues’ instead of replying to the allegation against him of failure to run the bank properly.

“His (managing director) statements don’t seem acceptable to the Bangladesh Bank,” the BB order read.

The bank has incurred an accumulated loss of Tk 435 crore till December 31, 2005, the letter mentioned adding that the total loss of the bank stood at Tk 57.31 crore last year while it has been around Tk 10 crore a month in the present year.

The BB letter said governed by the Islami Sharia Laws, the Oriental Bank cannot borrow money on high interest rates from the inter-bank call money market.

But because of sheer inefficiency of the management, the bank was forced to borrow in total Tk 213 crore from the call money market as of December 31, 2005.

It was so plagued by liquidity crisis that it could not return the term deposits of about Tk 200 crore by different banks–Pubali Bank, Basic Bank, Al Arafah Bank, National Credit and Commerce Bank, Rupali Bank, Shilpa Bank, HSBC and Bangladesh Krishi Bank, and the Jamuna Multipurpose Bridge Authorities.

The Oriental Bank was listed as a problem bank in 1994 due to mismanagement, huge bad loans by directors, capital and provision shortfall. At that time, the board of directors signed a Memorandum of Understanding (MoU) with the central bank in a bid to improve prime financial indicators of the bank.

But it failed to comply with the conditions set by the central bank and over the years its financial situation got worse.

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