Stop Media Trials and Exaggerations Regarding Banking Sector

Stop Media Trials and Exaggerations Regarding Banking Sector – The crisis in Bangladesh’s banking sector today is not a sudden occurrence. Years of operational weaknesses, looting under governmental patronage, irregularities, and above all, a record amount of non-performing loans have brought about this situation. However, this crisis has been deepened by several factors: the missteps of Bangladesh Bank, media exaggerations, and deliberate rumors spread by some dishonest bankers against rival banks. Under this multifaceted pressure, depositors’ trust in the banking sector has eroded. Additionally, every effort to address this crisis has only resulted in further chaos, as attempts to implement solutions have repeatedly stirred up panic and eroded depositors’ trust before any meaningful action has been taken to stabilize the situation. In the following discussion, I will attempt to shed light on the deep-rooted causes of this multifaceted crisis in the banking sector and explore the path toward its proper resolution.

Bangladesh Bank’s Missteps and Overzealous Actions

Despite having long-term and short-term ratings for the banks, just a month after taking office in July 2022, the outgoing governor of Bangladesh Bank, Abdur Rouf Talukder, identified 10 banks as “weak banks” in August 2022 and publicly announced this in a press conference. Although he did not reveal the names of the 10 banks during the conference, the media soon uncovered and publicized them. This sparked panic among the depositors of those banks, leading them to start withdrawing their deposits. In response to the growing turmoil, Bangladesh Bank was later compelled to issue a public notice in November 2022 to control the situation. The notice stated that, “Conspiratorial rumors are being spread through various social media platforms urging people to withdraw their deposits from banks. Bangladesh’s banking system is in a very strong position, and there is no liquidity crisis. It is worth noting that in the 51 years since independence, no bank in the country has ever closed down. We expect no bank to close in the future either. People’s deposits in banks are completely safe.”

See More:
◾ ব্যাংক খাত নিয়ে মিডিয়া ট্রায়াল, অতিকথন ও অতিরঞ্জন বন্ধ করুন

In March of this year, news of another overzealous action by Bangladesh Bank spread through the media—reports of a merger between weak banks and stronger ones. This reignited the dormant panic among depositors. Fearing they might lose their deposits, many rushed to withdraw their funds from the weaker banks all at once. Despite the banks’ best efforts to manage the situation, conditions continued to deteriorate. Amidst this turmoil, news of a secret report from Bangladesh Bank suddenly surfaced, claiming that banks had been classified with red, yellow, and green tags. These consecutive blows further weakened the already struggling banks, intensifying their crises.

It is crucial to identify weak banks to take corrective action, but Bangladesh Bank should have provided these banks with at least a minimum period to address their issues before making these negative ratings public. Unfortunately, this time was not granted. Moreover, the reaction of depositors and the potential economic impact were not taken into account. As a result, the sudden negative classification caused panic among depositors, further weakening the position of these banks. On the other hand, banks that received positive ratings gained an automatic advantage, which further strengthened their position.

However, due to lobbying by the weaker banks, various promises, protests from employees, and widespread criticism from different quarters, the issue of bank mergers was temporarily taken off the table. This allowed the situation to begin stabilizing to some extent.

After the fall of the Hasina government following the anti-discrimination student movement, Dr. Ahsan H. Mansur took over as the new governor. Before assuming office, he had been a vocal critic of the irregularities in banks, and after becoming governor, he continued in the same style. He publicly remarked that “some banks have reached the point of bankruptcy.” However, what he perhaps failed to consider was that his statements before and after assuming the role of governor had different impacts on the economy. Now that he was the highest authority in the banking sector, any declaration of bankruptcy from him was sure to raise alarms among depositors.

It’s akin to a father placing an ad for a groom for his daughter but phrasing it as, “Looking for a suitable groom for my abused daughter.” The reaction of potential candidates is predictable, and one doesn’t need rocket science knowledge to understand the outcome. Similarly, the governor’s comments caused unprecedented turmoil in the banking sector. This has created the most severe crisis in the history of the banking sector– the Chittagong port announced that it would no longer accept cheques and pay orders from certain banks, and corporate clients began to turn away from these banks. Within days, the vaults of several banks were emptied, and even regular customers were unable to withdraw cash against cheques of just a few thousand takas.

Therefore, Bangladesh Bank must also bear responsibility for the current crisis. If anyone is to blame for weakening the country’s banking sector, it is not solely the responsibility of one party; while the banks’ boards and management share part of the blame, Bangladesh Bank and the government must bear equal, if not greater, responsibility. It is neither fair nor reasonable to place the entire blame on bank officials and boards while hastily tagging banks as bankrupt or deciding to shut them down.

Media Trials and News Exaggeration

The banking sector in our country has become a hot topic. Everyone from government officials to civil society to the general public are all making comments and criticisms about the state of the country’s banking sector. Newspapers and television media are sensationalizing headlines at will. It goes without saying that YouTubers and Facebook commentators add to the noise. Just as the sensitive mimosa plant recoils at the slightest touch, the banking sector is equally fragile. A minor disruption in depositor trust can lead to significant consequences. Therefore, comments about banks should be made cautiously, considering both their negative and positive impacts.

However, it is unfortunate that the media in our country often presents judgmental news about the banking sector, arbitrarily using negative adjectives before the names of various banks, such as “weak bank,” “troubled bank,” “the banking sector in shambles,” or “many banks in dire straits.” These negative and judgmental terms have instilled fear among depositors, driving them away from the banks.

Some media channels engage in a competition to boost their viewership and click rates without considering the ethical implications or impacts of their news. In their quest for higher ratings, they don’t hesitate to prioritize trivial stories, even highlighting figures like Hero Alam. Not only do they use negative adjectives, but they also exaggerate headlines, inflating the subject matter to an absurd degree. Headlines are crafted in such a way that readers or viewers feel compelled to click on the news. In this click-driven competition, some media irresponsibly cover the sensitive banking sector, with headlines like “15 banks devouring capital,” “14 banks on the verge of bankruptcy,” “banks are open, but money is missing,” or “9 banks flagged red, 29 flagged yellow.” Such repetitive and exaggerated headlines have intensified fear among depositors, prompting a significant number to withdraw their funds simultaneously. This has further exacerbated the liquidity crisis in the banks, making resolution even more challenging.

Spreading Rumors and Misinformation by the Competing Bankers

The crisis in Bangladesh’s banking sector is being exacerbated by some unscrupulous bankers spreading deliberate rumors against rival banks. Many bankers attempt to siphon customers from other banks to meet their personal deposit targets. In this process, they portray their own banks as strong while depicting competitors as weak or unsafe.

Additionally, there are some bankers who create an environment where customers feel their dignity and reputation are at risk as soon as they engage with them! Particularly, certain bankers derogatorily label conventional banks as “usury” banks, framing banking with them as a morally “inferior” act. They even invoke religious fears, labeling associations with these banks as “hellish” actions. Taking their slander campaigns a step further, they instill various fears in customers, warning them, “If you’ve invested in a double scheme at this bank, who knows if the bank will still exist by the time your money doubles!”

Such unethical marketing tactics drive customers to panic and withdraw their deposits. If these tactics and rumors target genuinely weaker banks, it exacerbates their liquidity crisis and worsens their financial condition. This kind of unhealthy competition is harmful not only to one or two banks but also creates an atmosphere of instability and mistrust throughout the entire banking sector.

Addressing the Crisis

Effective Policy Formulation and Long-Term Support from Bangladesh Bank: Now is the time for Bangladesh Bank to close all avenues for long-standing irregularities and corruption by formulating effective policies and providing long-term liquidity support to banks. The failure of large banks, such as Islamic Bank and National Bank, which have become giants in the country’s banking sector through their extensive networks and diverse services, would lead to economic stagnation. Considering the millions of customers and the vast employment these banks provide, along with the future of their families, it is imperative for Bangladesh Bank to implement long-term measures to revive these institutions through liquidity support.

However, the interest rate on this liquidity support must be set in a way that does not put financial pressure on the banks. High-interest support could lead banks to default rather than recover, potentially creating an even bigger crisis. Additionally, increasing the number of shareholder directors on the bank’s board is crucial to ensuring effective recapitalization. A higher number of independent directors could raise questions about accountability and commitment to the bank’s interests.

Furthermore, with the assistance of the courts and law enforcement agencies, as well as supportive policies from Bangladesh Bank, the recovery of non-performing loans must be expedited. At the same time, Bangladesh Bank should avoid policies that could further jeopardize the financial standing of weaker banks.

Media Awareness and Responsible Reporting by Bangladesh Bank: Bangladesh Bank should thoroughly consider the potential impacts of any report or media briefing on the economy and depositors before making it public. Responsible officials in the media should present their statements in a way that prevents the spread of misinformation or unnecessary panic, thereby avoiding any uncertainty or instability in the banking sector.

Publication of Strong Banks’ List by Bangladesh Bank: Bangladesh Bank should focus on publishing a list of strong or successful banks each year, rather than releasing a list of weak banks, as it has been doing through its sustainability reports for several years. This approach would allow negative aspects of the banking sector to be presented in a positive light. Instead of causing panic, deposit withdrawals, and liquidity crises among customers—which often result from the publication of a weak bank list—sharing a list of strong banks would foster a positive outlook in the banking sector. Such initiatives would encourage healthy competition among banks and motivate others to improve their performance.

Responsible Headlines and Reporting: The media must adopt responsible practices by avoiding the use of negative adjectives in headlines and news coverage. It should refrain from disseminating news that spreads panic among depositors or complicates the crisis in the banking sector. Additionally, the media has a vital role in raising awareness among customers about rumors and false information, ensuring that the public remains informed and vigilant against misleading narratives.

Media Monitoring Wing: A joint initiative by the Bangladesh Association of Banks (BAB) and the Association of Bankers, Bangladesh (ABB) should establish a Media Monitoring Wing to take swift action against false and panic-inducing news published in the media. Channels that spread misinformation about the banking sector on social media platforms like Facebook and YouTube can be reported to those platforms. This would help mitigate the spread of rumors to some extent.

Regulating Competing Bankers’ Behavior: To maintain healthy competition in the banking sector, it is essential to curb the tendency of spreading rumors against rival banks. A list of bankers accused of disseminating rumors should be prepared through regular monitoring and oversight, followed by legal actions against them. Additionally, a detailed policy regarding bank switching for customers can be formulated, which would ensure transparency and fair competition within the banking sector.

In conclusion, overcoming the current crisis in Bangladesh’s banking sector requires the coordinated participation of the Bangladesh Bank, bank directors and employees, customers, the media, and the judiciary. The Bangladesh Bank’s effective policies and responsible behavior can stabilize the situation. Bank directors must prioritize the survival of their institutions over personal gain and adopt a business-minded approach in the boardroom. Bankers should avoid criticizing other banks and instead concentrate on showcasing the strengths of their own institutions.

It’s important to note that it takes just one bullet to end a life, but saving a critically ill patient requires successful surgery and long-term intensive care. There is no merit in destruction; true excellence lies in healing and preservation. Therefore, if the current governor can revitalize Bangladesh’s struggling banks, history will remember him for it.

Writer: Mosharaf Hossian, Senior Principal Officer & Deputy Head, MIS & Research Department, National Bank Limited, Head Office, Dhaka