NBP operations in Bangladesh: NA panel invites NAB to probe Rs18.5 billion loss

Forensic audit report reveals 61 officials were involved in the scam.

ISLAMABAD:

As a forensic audit report holds 61 officials responsible for the loss of Rs18.5 billion in Bangladesh operations of National Bank of Pakistan, a parliamentary panel has referred the scam to the National Accountability Bureau to catch the culprits and recover the money.

The decision to involve the country’s top-most accountability body was taken by the National Assembly Standing Committee on Finance and Revenue, headed by Omar Ayub Khan of the PML-N.

The committee took the decision as the number of officials accused of causing the loss grew from 27 to 61 including former presidents and the loss increased to Rs18.5 billion against the initially reported figure of Rs11 billion.

Ayub also directed the Securities and Exchange Commission of Pakistan to initiate action against NBP’s external auditors who could not pick glaring irregularities.

The findings revealed that the external auditors could not ensure compliance with the circulars relating to provisioning for classified advances, as directed by inspection teams.

Ayub had constituted a sub-committee to probe the causes of the Bangladesh scam and hold accountable those that were behind the scandal. The sub-committee, headed by Qaiser Ahmed Sheikh, has recommended swift action against the NBP officials.

The NBP management has not initiated action against its four former executives including a president, citing legal obstacles, said Sheikh.

Probe intricacies

According to the report of the sub-committee, in the light of the KPMG auditors, who were hired for the forensic audit, as many as “61 delinquent employees” have been identified who were prima facie found involved. These people were posted in Bangladesh branches, the regional office in Bahrain and the head office in Karachi.

“The NBP management charge-sheeted 57 employees and disciplinary proceedings have commenced in accordance with the bank’s Employee Discipline Policy, approved by the board of directors,” states the report.

The proceedings against the remaining four persons that include the bank’s former president have not been started yet.

According to the legal opinion obtained by the bank, the board of directors cannot charge sheet the former president and action has to be taken by the federal government. Some of the ex-employees are presidents of other commercial banks and action against them can only be taken by the federal government.

Yet again, the role of the NBP board appeared suspicious, as it ordered an internal inquiry on December 22, despite the fact that the KPMG report clearly pinpointed 61 officials for causing the colossal loss. The board also directed the management not to hand over the matter to any external agency until the internal inquiry was completed.

The NA standing committee asked the NBP management to obtain another legal opinion, as the first one bars the bank from taking any action against its former presidents.

During the period 2002 to 2012, the NBP Bangladesh operations were reporting to the regional office in Bahrain. The regional chief executive was directly reporting to the NBP president, according to the panel’s report.

Irregularities

The findings of the KPMG and the sub-committee reveal that timely classification of loan accounts was not carried out in the light of the Bank of Bangladesh circulars, resulting in losses.

Appropriate securities were not obtained against sanctioned limits to fully secure the bank’s interests.

There were clear violations of the business discretionary powers in sanctioning and rescheduling of loan accounts. Frequent enhancement of limits was allowed without any reasonable justification. Audited financial reports were missing in some loan cases. Citing KPMG’s report, the sub-committee report states that “Bangladesh operation appears to have started facing problems from the year 2007, when branches initially reported non-performing loans/advances, although the initial trigger was seen in 2003.”

A total of 19 triggers were sent to the head office from 2003 to 2012 but no action was taken.

Published in The Express Tribune, February 4^th, 2015.

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