DHAKA: The business continuity of Sonali Bank UK Ltd (SBUK) has become a major concern since its reputation took a serious hit in both Bangladesh and United Kingdom, said a Bangladesh Bank report. The UK Financial Conduct Authority (FCA) fined the bank £3.25m in October, 2016 for failing to put anti-money laundering controls in place. The central bank voiced its concerns in a report titled “Comprehensive Inspection Report on Sonali bank (UK),” which was sent to Financial Institutions Division under the Ministry of Finance last week. General Manager and team leader of the inspection team Sheikh Mazaffar Hossain was in charge of compiling the report. According to the report, BB is also concerned about the profitability of SBUK, as the bank’s income and expenditure have fell out of balance, causing instability. The key performance indicators of SBUK for three years (2013, 2014 and 2015) have revealed the bank’s increasing financial vulnerability. Data collected by the BB pointed out that the Return on Asset (RoA) and Return on Equity (RoE) indicators of SBUK went negative in 2015. Meanwhile, net profit to total income was -22.70% in 2015, a significant drop from 26.90% in 2014.
The SBUK has been subjected to strict regulations by the FCA for taking deposits, but failing to invest it in a profitable way. Moreover, it also needs to maintain a buffer against deposits to mitigate the bank risks. Under these circumstances, the Bangladesh Bank has directed SBUK to review its business plan and develop a practical business continuity plan to tackle the looming threats of possible insolvency. SBUK was also directed to set up a plan for improving the remittance business, that includes a target for outflow remittance and new deposit products. BB also formed an outsourcing policy for SBUK for running the bank, and has ordered shut down of four of its branches in the UK. Three of the four branches were closed down last year, due to financial irregularities and losses. Sonali Bank sought consent from the central bank to transfer Tk171 crore to its operation in the UK that is suffering from cash crunch in 2017. SBUK currently has two branches in the UK– one Camden in London and another in Birmingham. Sonali Bank UK Ltd was set up jointly by the government and the state-run commercial bank in 2001 with a capital of £11.57 million. The government owns 51% of the shares, while the remainder is owned by Sonali Bank.
