6 other banks were investigated for pricing abuse

An investigation has begun to dig deeper into allegations of currency abuse by six other commercial banks that fueled market volatility.

Six teams from Bangladesh Bank (BB) have been dispatched to carry out further inspections against five private commercial banks (PCBs) and one foreign commercial bank (FCB) in this regard, officials said.

Teams set to conduct on-site inspections on Monday, to investigate higher currency gains through unethical practices during the January-July period of the current calendar year, they said. added.

Investigators were also tasked with collecting information on corporate transactions, interbank transactions, forward customers, net revaluation gains and regular customer gains during the period under review.

Inspectors were also asked to examine the authenticity of foreign exchange gains given the volume of foreign trade, which has increased significantly in recent months, officials said.

On August 17, the central bank served show cause notices on senior executives of six banks for their alleged involvement in fueling volatility in the foreign exchange market through unethical foreign exchange gains, blocking their profits.

The central bank issued the notices after more than a week of action against the treasury chiefs of the six banks for their alleged involvement in making excessive profits through unethical practices in foreign currency exchange.

Earlier on August 8, the central bank had asked the managing directors (MDs) and managing directors (CEOs) of the same banks to immediately relegate their treasury heads to the human resources (HR) department on the allegation of fueling the exchange mark recently. citing “unusual” higher greenback prices.

In May 2022, the central bank carried out similar on-site inspections at 16 banks, including four state-owned commercial banks (SoCBs), to uncover alleged “distortion” in the exchange rate by the banks involved.

Rate distortion means that banks charge higher prices for US currency by circumventing their advertised rates, especially for BC (bills to collect) sale and TT (telegraphic transfer) clearing.

The teams had found that banks were incorrectly displaying their currencies deposited in overseas accounts, officially known as the Nostro account, in their net open position (NOP).

A Nostro account is an account that a local bank holds with a foreign bank in foreign currency.

Meanwhile, the Bangladesh Bank continued to provide foreign exchange support to regular banks to manage volatility in the foreign exchange market.

As part of the ongoing moves, the central bank sold an additional $67 million directly to three SoCBs on Monday to help them meet growing demand for the greenback as rising global prices led to escalating investment costs. importation with its resulting pressures on the reserves of Bangladesh, as well as many other countries.

The central bank has so far injected $1.92 billion of reserves directly into commercial banks as liquidity support for import payments in the current fiscal year FY23.

In FY22, the central bank sold $7.62 billion of reserves to banks for the same purpose.

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