Adoption of global reporting standards could reduce bank assets by 40%: FRC chairman

Highlights

• If the audited financial reports of banks were prepared following the IFRS, 40% of the bank's assets would decrease and the real financial condition of banks will come out
• The international accounting standard IFRS-9 is not followed in the financial statement of any bank in the country
• According to the central bank data, the total outstanding of banks till 31 December 2022 was Tk14.77 lakh crores
• At present, the amount of defaulted loans is Tk1.20 lakh crores

If the audited financial reports of banks were prepared following the International Financial Reporting Standards (IFRS), 40% of the assets of banks in Bangladesh would decrease and the real financial condition of banks will come out, said Financial Reporting Council Chairman Professor Hamid Ullah Bhuiyan.

"The international accounting standard IFRS-9 is not followed in the financial statement of any bank in the country. We want IFRS to be implemented but the central bank has not yet adopted it," he said at a discussion organised by the Capital Market Journalists Forum (CMJF) at the capital's Paltan on Monday.

According to the central bank data, the total outstanding of banks till 31 December 2022 was Tk14.77 lakh crore. 

If IFRS is followed, a 40% loan will be written off, which means a reduction of about Tk6 lakh crore from the total asset.

Experts said that according to international accounting standards, unrecoverable defaulted loans should be written off from the balance sheet, but to do this hundred percent provision has to be kept against the amount written off. The current financial condition of the banks will be weakened.

At present, the amount of defaulted loans is Tk1.20 lakh crore, which is 8.16% of the total loan.

The FRC chairman said, "Defaulted loans are being dragged on for years. We see in our country's culture that defaulted loans cannot be recovered. Instead, loans are rescheduled at a 2% down payment. Then the borrower takes a loan from another bank."

Seeking anonymity, a managing director of a bank, however opposed the FRC chairman's remarks. 

He said, "On what basis the FRC chairman said this? This is not acceptable as we prepare financial reports following the IFRS."

Professor Hamid Ullah Bhuiyan also said that the easy availability of bank loans is the main reason or private companies' reluctance to get listed on the stock market, adding a company having Tk100 crore in equity has Tk900 in liability. 

Companies are not interested in raising money from the capital market also because of the various regulations and documentation required for it. 

But, bringing large private companies to the market is very important for the market's improvement, he added.

Hamid Ullah Bhuiyan further said, "Life insurance companies never maintain profit and loss accounts. They do one account – a revenue account. But International Accounting Standard -1 clearly states that a profit and loss account should be done, regardless of the type of the company. Even they do not respond to our letters. Other regulators respond to some extent."

CMJF President Ziaur Rahman presided over the programme conducted by CMJF General Secretary Abu Ali.