Unusual profits from dollar trading: BB seeks explanations from six banks’ MDs
They have been asked to explain ten issues about dollar dealings including unusual profit and high spread between buying and selling costs
The Bangladesh Bank has sought explanations from the managing directors of six banks over their alleged involvement in making excessive profits from selling the US dollar.
The six banks are Dutch Bangla Bank, Southeast Bank, Prime Bank, City Bank, Brac Bank and Standard Chartered Bank.
The central bank sent a show-cause letter to the MDs on Wednesday, said Bangladesh Bank Executive Director and Spokesperson Serajul Islam.
Keep updated, follow The Business Standard's Google news channel
The banks were asked to explain ten issues with respect to dollar dealings, including unusual profits and high spread between buying and selling costs. Besides, they have to present the overall picture of dollar sales to importers and encashment of export proceeds to the central bank.
The other issues are selling dollars outside the rate fixed by the government, providing incorrect information about net open position of banks, not encashing export proceeds on time, creating market instability on various foreign exchange operational issues and emittance collection rates.
The banks will have to reply in seven working days.
The central bank's directive comes more than a week after the central bank took action against these six banks by asking them to remove their treasury chiefs on the grounds of making aggressive exchange gains that intensified the dollar crisis in the market.
In another letter on the same day, the central bank asked the six lenders not to transfer their earnings from foreign exchange dealings to their income accounts.
According to the letter, the incomes will be kept in a separate account. If any bank transfers the earnings to income accounts, it will have to revert the amount as per the Bangladesh Bank directive.
They will inspect every bank and will take action if anyone is found to have transferred unusual profits from dollar dealings to income accounts, Sirajul Islam.
Seeking to be unnamed, several officials of the six banks told The Business Standard that they could not know about how many days they have to give a reply to the show-cause letter.
The treasury head of a bank told TBS that the central bank is looking into the issue of excess profits made by some banks from dollar sales. But it is showing no care for the banks that are now unable to open LCs owing to the dollar crisis.
There is a deficit in the net open position of most banks, while the dollar is at the oversold level in most banks, he said.
The central bank has not officially announced the dollar buying and selling rates yet, he noted.
However, the BB spokesperson told the media that a maximum gap will be Tk1 between buying and selling rates of dollars for banks.
Currently, banks are collecting remittances at Tk112, while the interbank exchange rate has been kept at Tk95, the treasury head pointed out, suggesting that the interbank rate be at least Tk108.
In the meantime, eight more banks make unusual gains from forex dealings, according to data from the central bank.
Bank Asia, a private commercial bank, has registered the highest 770% year-on-year growth in its profit from foreign exchange dealings in the first six months of the current year.
The bank's profit from dollar trading surged by around eight times to Tk200 crore in January-June from only Tk23 crore in the same period a year ago.
Seven other banks that made excessive gains through dollar trading are NCC Bank, Dhaka Bank, Mercantile Bank, Shahjalal Islami Bank, United Commercial Bank, Eastern Bank and Islami Bank.
Sources at the Bangladesh Bank said the banks that were punished by the central bank gave wrong information about their net open position. They showed dollars lower than what they actually had.
Also, they made excessive profits by buying dollars at a low price from the Bangladesh Bank and selling those at a high price, they added.
A senior central bank official said, "This is a clear violation of the central bank rules. Many banks made profits this way. if the net open position limit is crossed, the accumulated dollars have to be sold elsewhere."
Exchange houses of banks on Wednesday collected remittances at Tk112 per dollar, while banks settled LCs at Tk108 per dollar. Besides, export proceeds were encashed at Tk106 per dollar.
