Since the interim government took office, reforms have been initiated in various sectors, including the economy. A major aspect of economic reforms is the banking sector reform. But now questions are being raised among those involved in the sector about the underlying motives behind the banking sector reforms. An article about this topic was published in the New York Globe on Thursday.
A major question is now being raised about a law in the banking sector. There are various discussions going on about whether the purpose of this law is to restore stability in the financial sector or something else. This new law is destroying the economic empire of businessmen loyal to the previous government. Questions are also being raised about the political motives of the law.
Bangladesh Bank has recently brought amendments to the ‘Bank Resolution Ordinance.' Through the amendments, Bangladesh Bank has now acquired several new powers. The government has presented this reform as a tool for good governance and accountability.
Under the amended law, Bangladesh Bank now has the power to reconstitute the board of directors of private banks, cancel shareholdership, appoint administrators, and forcibly change the structure of the institution.
The man behind this law reform is Dr. Ahsan H. Mansur, Governor of Bangladesh Bank. He is also a former economist of the International Monetary Fund (IMF).
Dr. Mansur described the amendment to the banking law as a tool to eliminate long-standing irregularities and corruption in the sector and establish accountability, but critics say its main function is to create a path to take control of corporate institutions through the imposition of political sanctions.
The government is now set to take state control over six private banks after introducing this banking sector amendment. Many observers are seeing the government's initiative as a 'danger signal.' They say the law was not made for sustainable and systematic reforms but to break up the businesses of businessmen loyal to the previous Awami League government.
The blueprint for confiscating the assets of businessmen, developed by the interim government, has been in use for a long time in Russia and various countries in Central Asia. This strategy is called 'Reiderstvo' in Russian. This is called the 'institutional method' of state-led control of corporate institutions. Various strategies are also adopted to take control of corporations. If necessary, criminal cases are also filed against the owners of these institutions so that no one can resist control. The sure result of this is the political transfer of wealth, whose disguised name is 'reform.'
Two notorious incidents involving the Russian government can be cited in this context. One is the Yukos oil company, which collapsed in the early 2000s due to opposition to the Kremlin. Various charges, including tax evasion, were filed against its owner, Mikhail Khodorkovsky. Mikhail was eventually declared bankrupt. His assets were sold off. The state-controlled Rosneft bought the assets.
Another company is Wim-Bill-Dann. It was a major player in the Russian dairy sector. However, through regulatory laws and financial coercion, the company's shares were transferred to PepsiCo.
Surveillance laws may vary from country to country, but their ultimate goal is the same: to take state control over a political opponent or independent force by destroying its economic capabilities. The concern is that Dr. Mansur recently announced that six private banks will be brought under state control. The banks will be handed over to "powerful foreign investors." The main target of the interim government seems to be the S Alam Group in Bangladesh. This Chittagong-based business group owns the main shares of Islami Bank Bangladesh Limited, Social Islami Bank, and First Security Islami Bank. The business has expanded its footprint in the steel, power, shipping, and financial sectors over the past decade. It is alleged that the S Alam Group had close ties with the Awami League government of former Prime Minister Sheikh Hasina.
The administration led by Professor Dr. Muhammad Yunus and his associates has changed its political focus. Instead of resolving the current crisis in the financial sector, they are now targeting the S Alam Group. Their goal is to target businessmen who were loyal to the previous government.
The approach of this government is not just against one business group. Information received from various sources indicates that the government is working with such an approach against at least ten business groups in Bangladesh.
The groups are Bashundhara Group, Beximco, City Group, Square Group, Anwar Group, Partex Group, AK Khan Group, Jamuna Group, Pran RFL, and Navana Group. The government has increased supervision of these institutions. They are auditing and examining them. They are looking into the source of their wealth.
Although there are differences between the businesses and factories of these groups or business groups, they have one thing in common: they were close to the Sheikh Hasina government.
The new political leadership is trying to build a new financial institution structure using legal reforms as a tool for Bangladesh Bank. This government has no mandate from parliament. However, they have public support for their anti-corruption narrative.
Perhaps everyone would agree that a part of the banking sector needs reform. But when these supervisory agencies are used against a particular business group, the credibility of Bangladesh's regulatory system is questioned. Investors from the Persian Gulf region and Southeast Asian countries will question whether private investment in Bangladesh is safe, especially in the context of the changing political landscape.
The resulting instability could harm the macroeconomy. Forced changes to the banking structure could undermine depositor confidence. This could lead to a reduction in credit flows and a slowdown in foreign investment, particularly in the Sharia-compliant financial sector, where long-term trust and confidence are essential.
A Bank Resolution Ordinance is theoretically needed to restore order in Bangladesh's financial sector. But in terms of implementation, the policies and strategies the government is implementing bear a strong resemblance to Russia's 'Reiderstvo.'
