Bankers Suggest M&A of Banks and NBFIs to Face post-Covid Challenges

Bankers-Suggest -M&A-of-Banks-and-NBFIs-to-Face-post-Covid-Challenges

A leading banker Saturday suggested large-scale merger and acquisition (M&A) of banks and financial institutions of the country to cope with COVID-19 pandemic challenges.

Another banker while participating in a virtual workshop, organised by the Bangladesh Institute of Bank Management (BIBM), saw risks in implementing the government-announced financial relief packages by banks.

Echoing the concerns of the bankers, a BIBM study paper presented at the workshop advised both bank management and boards to be ready to address the longer-term challenges associated with the ongoing COVID-19 pandemic.

And the banks should accordingly estimate and make arrangements for the additional resources needed to address the emerging scenario, said the study.

A number of recommendations came in the paper on 'Economic, Monetary and Financial Sector Implications of Covid-19: Preparedness of Banks in Bangladesh."

It was presented at a workshop by Dr. Shah Md. Ahsan Habib, Professor and Director of BIBM.
The paper also suggested a few health safety measures for both bank employees and clients.

The other action plans the paper listed include preparatory work for probable infrastructural changes, reviewing credit portfolios and payment services to assess existing and potential risks, capital and solvency status, optimal utilisation of relief packages, financing for liquidity injection into the economy, maintaining transparency with regulator, and taking care of the reputational and the country risks.

Speaking at the programme, Anis A. Khan, former Managing Director of Mutual Trust Bank Limited, said the Covid-19 impact is unprecedented one in recent memory, but "we will overcome it."

He said Bangladeshi people have always proved their resilience during the natural calamities and they will not fail this time too.

The banker thinks there will be a lot of mergers and acquisitions in the banking sector in the new world order that will follow the coronavirus pandemic.

"I do advocate large-scale merger and acquisition in Bangladesh," he said.
He said there are many weak banks and non-bank financial institutions (NBFIs) and these should be merged with relatively large and strong financial institutions.

"Larger banks with stable balance sheets, high asset quality and strong capital base can make the country's banking sector invincible," he maintained.

He also said every bank does not require ATM booths, booths could be shared to save costs.

Many factories have reopened, new orders are being placed, he said, adding that everyone should be accustomed to new normal.

Ali Hossain Prodhania, Managing Director of Bangladesh Krishi Bank Limited, said there is no liquidity risk in implementing the government-announced economic relief packages.

"If there comes any risk, the central bank will take care of it as these are the government-announced packages," he said.

"We must implement packages as soon as possible then the economy will rebound at quick pace," he said.

Syed Mahbubur Rahman, Managing Director and CEO of Mutual Trust Bank Limited, however, differed with his colleague, saying there are risks in implementing the packages.

He said many businesses are likely to go bust in the Covid-19 crisis, so it is not right to say there is no risk in giving out loans to the existing clients under relief packages.

He said banks' advance-deposit ratio (ADR) will come under pressure after the implementation of the packages.
Mr Rahman said that most of the banks will report negative earnings in June if they were to waive interest for the months of March and April.

"The banking industry has to be protected for the greater interest of the economy," he said.
He recommended the policy rate reduction to help support the packages.

Faruq Mainuddin Ahmed, Managing Director and CEO of Trust Bank Limited, said the country needs to manage Covid-19 crisis on its own as this is a global crisis.

"We will not get assistance from the developed world like every previous natural disaster, we will have to depend on ourselves," he said.

He said cottage, small and medium enterprises are the "most vulnerable" and they require the rescue packages most.

"We are being pressurised to release funds under stimulus package by large businesses and industries, but SMEs couldn't come to us, so banks should handle this issue carefully," he said.

Mr Ahmed also said the banks do also need relief packages like other sectors, the government should think about it.

Naser Ezaz Bijoy, Chief Executive Officer of Standard Chartered Bangladesh, said the government should start borrowing in foreign currency from multilateral agencies to cover the reduction in earnings from remittances and exports.

Mahbubur Rahman, Managing Director of Islami Bank, Professor Barkat-e-Khuda, Dr. Muzaffer Ahmed Chair Professor of BIBM; Dr. Prashanta Kumar Banerjee, Professor and Director of BIBM, Mohiuddin Siddique, Professor and Director of BIBM, and Nehal Ahmed, Professor of BIBM, spoke, among others, at the event.

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