Two international firms – Ernst & Young (EY) and KPMG – have begun special audits into six Bangladeshi banks that have long been struggling due to irregularities and corruption under the ousted Awami League government.
The central bank, Bangladesh Bank, took the initiative to ascertain the actual financial state of the banks. Upon receiving the audit reports, the authorities will decide whether to merge, acquire, liquidate, or recapitalise the banks while intensifying loan recovery efforts.
The special audits are expected to be completed within six months, with funding from the Asian Development Bank (ADB). The six banks under lens are – First Security Islami Bank, Exim Bank, Global Islami Bank, Social Islami Bank Limited (SIBL), ICB Islamic Bank, and Union Bank.
As per recommendation from the Bangladesh Bank, the six banks’ managing directors have already been sent on leave, while one in each of the banks has been made focal point officer, with another official from the audit firms serving some special duties.
Local auditors of the firms, along with central bank officials, have started gathering information. The firms will send some more representatives to Dhaka early next week.
According to central bank sources, Ernst & Young is auditing the actual value of the assets held by Global Islami Bank, Social Islami Bank, and ICB Islamic Bank, while the KPMG is entrusted with auditing the First Security Islami Bank, Exim Bank, and Union Bank.
Among the six banks, four were previously owned by S Alam Group, a conglomerate owned by Saiful Alam who was close to fallen prime minister Sheikh Hasina. S Alam Group entities reportedly withdrew a staggering sum of money from these banks, using various tactics, including sham companies.
As the banks are now struggling to recover the loans, the central bank reconstituted their boards following the political changeover in August.
What led to the audits?
The central bank officially sought various information from the banks concerned to provide the auditors. According to the letter sent to the banks, the Bangladesh Bank has formed a task force to reform the banking sector, with the aim of ensuring discipline in lending and important services, safeguarding depositor interests, and boosting public confidence in the banking system.
Under the initiative, it has decided to assess the financial health of the banks through international consultants, considering the banks’ multifaceted engagement and participation in international business.
The central bank appointed an international firm to carry out the asset quality review (AQR) on the banks. In the process, assets held until 30 September will be considered, while the audit firms will consult with the board of directors, managing directors, senior management committee members, auditors, and other stakeholders, and will seek required information and documents.
Abdul Mannan, chairman of First Security Islami Bank, said it is a time-befitting initiative to carry out international audits, as even the finest local auditor would face questions had they reported about the damages suffered by the banks.
“It will expose the true beneficiaries and individuals responsible for the irregularities. None would raise questions about their audit report, and it would help make a good decision, in addition to using it in legal proceedings in home and abroad. It will silence many people,” he said.
prothom alo
