Capital levels of banking sector

Friday, 5 May 2017 00:00 -     - {{hitsCtrl.values.hits}}

01An article in a newspaper highlights that banking sector capital levels have slipped down drastically. The capital adequacy of most banks have fallen and as well as core capital. The record private sector credit growth to show big profits is shortsighted by bank CEOs and boards. 

One of the big banks with a history in the hills had sold the very property on which they started their business for a song. The buyer has happily turned it into a museum type hotel. The same bank is selling more of its family silver, despite that attempting to raise record amount of capital from shareholders. What are the shareholders doing without suing the directors?

Another private bank has lost its way for lack of direction. NTB, which was considered a niche bank, has made more money than NDB and DFCC. What is wrong with these two development banks? 

Retired politicians and judges are appointed to banks, when banks need people who understand how banks make profit. It is a recipe for disaster. The three big private banks have one only banker per board. Most of them add no value to the bank. At a recent seminar a bank director did not know what Basel accord really meant. Another director did not know what CAR stood for. 

This is the only country in which we allow stock brokers, shareholders and businessmen with real conflicts to serve on bank boards and own finance companies.

We have a situation of a managing partner of a top audit firm overlooking the audit of another bank, chairing the audit committee, while other audit firms don’t allow their partners to serve on bank and finance company boards. In another bank common sense prevailed and a partner of audit firm was asked to leave. 

Minority shareholders and the depositors should go to the CBSL, or Court or SEC asking for these conflicts to be fully investigated. Those guilty must be fined or the bank should be fined. Bank higher ups are playing with public money not their money. Expect the next unexpected disaster from the financial sector, like the garbage dump exploding.

A retired banker