BB wants closure of Janata’s Italy arm due to anomalies, losses

AKM Zamir Uddin | Published: 00:08, Oct 30,2016

 
 

Bangladesh Bank has recommended that the finance ministry close down Janata Bank’s exchange house in Italy because of irregularities and making huge losses.
On September 1, the BB sent a letter to the Bank and Financial Institutions Division of the ministry saying that Janata Exchange Company (JEC), a subsidiary of the state-owned bank, located in Italy continued violating the foreign exchange regulation act and the central bank’s directives.
The JEC avoided sending inward remittance worth euro 15.92 lakh between 2009 and 2015 to Bangladesh to make up its loss, violating the foreign exchange regulation act, according to the central bank letter.
Janata Bank was forced to provide the remittance to the Bangladeshi clients from its own fund and the situation resulted in the country’s foreign exchange reserve being deprived of getting the foreign currencies.
Janata Bank set up the JEC in Rome in 2002 with taking prior approval from the central bank. Since then, the subsidiary company was able to maintain a profitable trend till 2008.
But, the JEC started to count loss from 2009 due to its mismanagement, a BB official told New Age on Wednesday.
The loss amount of the exchange house stood at euro 12.71 lakh in the period between 2009 and 2014, the BB letter said.
The JEC made up the loss amount of euro 12.71 lakh from the remittance money of the non-resident Bangladeshis.
For that reason, Janata Bank was forced to create with its Dilkusha branch a loan equivalent to euro 12.71 lakh as it paid the remittance money to the relatives of the NRBs from the bank’s fund.
The bank did not take any prior permission from the central bank to create the loan in favour of its subsidiary company, violating the article number of 5 under the foreign exchange regulation act.
The central bank, however, gave permission to Janata Bank to recapitalise its subsidiary company due to a finance ministry approval.
The BB asked the bank to keep provision from its operating profit against the recapitalisation and not to repeat any such incident.
But the JEC also faced loss amounting to euro 3.20 lakh in 2015 and made up the loss again from the remitters’ money to maintain its capital violating the act.
Janata Bank has recently applied to the central bank to recapitalise the JEC with euro 3.20 lakh, but the BB denied giving permission.
The exchange houses located in Italy have to keep minimum capital euro 6 lakh to operate the business, the BB official said.
Two Bangladeshi banks are now operating exchange houses in Italy while 17 banks have drawing arrangements with the Italian exchange houses to bring the inward remittances from the country, the letter said.
The country received inward remittance worth $108.39 million from Italy in the fiscal year of 2014-15. Of the amount, the JEC sent $16 million.
The BB in its letter said that there was no logic to maintain an exchange house in Italy given the fact that it was facing continuous losses.
The country’s inward remittance will not face any adverse impact if the JEC is closed down, the letter said.
Under the circumstances, the finance ministry should take decision in this regard as the country is deprived of getting the expected amount of inward remittance from Italy due to the JEC’s mismanagement.
The finance ministry is yet to reply to the central bank’s letter.
The BB inspection teams conducted two separate inspections at the JEC in 2013 and 2016.
According to the inspection reports, Janata Bank had no control on the JEC and it (exchange house) would be forced to maintain the losses if the existing situation continued in the coming days.
Janata Bank managing director Md Abdus Salam told New Age on Wednesday that the loss amount of the JEC had recently declined.
The JEC faced the losses in the recent years as business competition among the exchange houses in Italy increased, he said.
He said, ‘We have appointed only two officials at the JEC to avoid spending. Janata Bank has recently appointed four agents to speed up the inward remittance through the JEC.’
Bank and Financial Institutions Division secretary Md Eunusur Rahman told New Age on Wednesday that the central bank should take decision whether the JEC would be closed down or not as it had recommended in this connection.
The BB official, however, said that the central bank placed the recommendation before the finance ministry as the ministry sought opinions from the central bank in this regard.

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