Long-term loans from short-term deposits weaken banks, experts say
Analysts say heavy reliance on banks for long-term financing is weakening the financial health of local lenders.
And since a number of the country’s banks are suffering from a huge amount of non-performing loans, entrepreneurs should look to the stock market to raise funds if they need long-term capital, they said.
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Their comments came at a seminar, titled “High-performing companies listing barrier and its exit”, organized by a business news portal, businesshour24.com, yesterday.
Prof Shibli Rubayat-Ul-Islam, chairman of the Bangladesh Securities and Exchange Commission (BSEC), said it was risky for banks to provide large long-term loans from their short-term deposits.
Indeed, the rate of non-performing loans is so high that if the provisioning system had been absent, many banks would have had to close.
“Doing business is full of uncertainties, so when a company suffers losses and the entrepreneur does not repay his loans, all companies suffer, even the most successful ones,” he said in his statement. addressing the event as the main guest.
“So we are trying to get companies on the stock market to meet their capital needs, but we face challenges in that regard and we are patiently working through them.”
The BSEC chairman went on to say that if a company seeking to go public correctly submits all relevant documents, its initial public offering could be approved within seven to 30 working days.
“People go to banks for their capital needs because bank loans are easy to get,” said Faruq Ahmad Siddiqi, former chairman of BSEC.
“So as long as the banks have enough cash to finance long-term projects, entrepreneurs will not come to the stock market. Also, the national stock market does not match the country’s economic dynamism because it booms and busts for no reason. economic”.
Compared to the growth of Bangladesh’s economy last year, the stock market has not kept pace. Under these circumstances, only a few good companies have gone public in recent years.
“So investors also suffer from finding good scrips to park their hard-earned cash,” Siddiqi said.
Although stock exchanges are well placed to provide long-term financing solutions, only 0.07% of the country’s financing needs were met by the stock market in 2020, while the rest came from banks, said Mamunur Rashid , president of the Institute of Cost and Management. Accountants of Bangladesh.
“Tax evasion must be stopped by all means to get companies public. Companies are often reluctant to go public as they fall under the BSEC scanner and other legal obligations once listed,” he added. .
Sayedur Rahman, chairman of the Bangladesh Merchant Bankers Association, Akter Hossain Sannamat, advisor to Businesshour24.com, and Amirul Islam, publisher of the online news portal, also spoke.