Unhealthy competition makes banking sector unstable

Unhealthy competition in banking sector is creating instability as well as leading the sector to a precarious situation, experts opined on Tuesday. This sector is now facing serious difficulties for this bad practice, which is pushing the non-performing loans (NPL) in an alarming situation.

They urged authorities concerned to create some new rules and regulations besides implementing the existing laws strictly by giving freedom to Bangladesh Bank to make this sector stable as the banking sector is the key role player to boost the country’s economy. They came up with the observations at the review workshop on ‘Competition, Concentration and Banking Sector Stability’ organized by the Bangladesh Institute of Bank Management (BIBM) at its auditorium in the city on Tuesday.

Chairman of BIBM Executive Committee and Deputy Governor of Bangladesh Bank S M Moniruzzaman said, “From the post-liberation era till date the central bank along with the government is working to strengthen the financial system.” The Bangladesh Bank has initiated different laws and amended key sections in those laws to make the sector vibrant, he informed.

He also said that banking industry of Bangladesh has become highly competitive in terms of so many parameters like number of banks, area of operation, access to credit, cost and quality of financial services, innovation etc. Therefore, the impact of banks’ competition on stability is a key issue, he added.

Competition can bring significant benefits to the market players, national economy and society; but also can be a source of potential instability due to the tendency of taking more risk, he said, adding that like competition, concentration is also a debated issue in this sector.
Barkat-e-Khuda, BIBM’s Muzaffer Ahmed Chair Professor and former teacher of Dhaka University, said, “We need to work together for getting expected results for our financial sector.”

“I hope the deliberation of this seminar will be very helpful for all concerned,” he said adding that, “I also expect that researchers will incorporate the suggestions and comments while finalizing the paper.” However, a good number of participants including senior bank executives, academicians, media representatives, faculty members of BIBM took part in the roundtable discussion.

S A Chowdhury, Former Managing Director of Sonali Bank Ltd; Helal Ahmed Chowdhury, Supernumerary Professor of BIBM & Former Managing Director of Pubali Bank Limited; Md. Yeasin Ali, Former Supernumerary Professor of BIBM; Md. Arfan Ali, President & Managing Director of Bank Asia Ltd; Quazi Osman Ali, Managing Director & CEO of Social Islami Bank Ltd; Dr. Mohammed Helal Uddin, Professor of Dhaka University; among others, spoke at the event.