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Sonali Bank UK ceased operation temporarily

Mirror accounts opened to settle pending transactions

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14th-Nov-2017       
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Special Correspondent :
Sonali Bank Limited, Bangladesh has opened mirror foreign currency accounts (FCA) in the name of Sonali Bank UK to settle it's pending foreign trade transactions.
The accounts for USD, GBP and Euro currencies have been opened with Sonali Bank Limited's (SBL) Head Office in Dhaka following temporary 'winding up' of Sonali Bank UK's (SBUK) business ordered by the British government's financial regulators-- Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA).
The UK regulators came up with the harsh decision in August after finding serious flaws in the bank's internal and anti-money-laundering control systems as well as misconduct and lack of efficiency by top officials.
"The accounts have been opened to park up all the outstanding receivable and payable bills of business parties and corresponding banks with SBUK," a senior Sonali Bank official told The New Nation yesterday, on condition of anonymity.
He said the accounts have been opened under a 'contingency plan' devised for the bank.
The plan was adopted at the 537th board meeting of SBL on August 28.     
The government of Bangladesh holds 51 per cent of the shares of SBUK and 49 per cent by SBL, Bangladesh.
"The British regulators have asked the SBUK to devise the contingency plan prior to complete winding up of its business and put forward several recommendations if the Bangladesh government expects it to be fully operational again," said the Sonali Bank official referring to an official letter.
He also said earlier the SBUK authorities have requested us to open the accounts to comply with orders by the UK regulators.     
On July 21, SBUK received a letter from Nat West/RBC stating that it will close down the FCA accounts, which SBUK holds with it by serving 60 days' notice to SBUK.
Subsequently, SBUK applied for an extension and Nat West/RBC has extended the closure time for GBP and Euro Accounts till the end of this year. But it closed the USD account on September 19.
On August 24 this year, the Prudential Regulation Authority (PRA) of UK served a notice to SBUK for appointing a project manager for total 'winding up' of SBUK's business and asked SBL to confirm that the remaining foreign trade transactions can be settled through its account under a 'contingency plan'.   
In an emergency meeting held on 25 August, the board of SBUK agreed to provide a letter of support in respect of settlement of remaining trade finance transactions other than SBL though the accounts in case of winding off SBUK operations. In the light of this and the PRA's concern the board of management of SBUK took the decision to scale back its operation for the time being until such time as alternative satisfactory and fully operational clearing arrangement have been put in place," according to a SBUK letter.
SBUK's Chief Executive Officer (CEO) Sarwar Alam wrote the letter to SBL CEO Obayed Ullah Al Masud on September 9. The letter read SBUK has already ceased its operation provisionally, but the legacy of trade finance exposures remains in the books of SBUK. As there are restrictions from HAB UK for not routing any transaction other than SBL. Biman, Bangladesh Bank and SBUK need to have an alternative arrangement for perking their receivables dues to the proposed mirror (Nostro) accounts of SBUK with Sonali Bank Limited, Bangladesh.

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