Bangladesh Bank governor Ahsan H Mansur on Monday said that no reform effort in the banking sector will be effective unless political interference is fully eliminated.
Speaking at a press conference held at the Bangladesh Bank headquarters in Dhaka, the newly appointed governor strongly criticised the role of political influence in enabling widespread financial irregularities during the previous Awami League-led government.
There were massive irregularities in the banking system that occurred due to political misuse of power, Mansur said. Neither the banks nor the regulators were able to prevent these malpractices because of the political protection extended to wrongdoers, according to Mansur.
Mansur said without internal reform within the political ecosystem, institutional reforms alone won鈥檛 work, he said.
To address these deep-rooted problems, Bangladesh Bank has formally proposed amendments to the Bangladesh Bank Order. The amendments, if approved by the government, would provide the central bank with greater operational independence and the legal authority to resist political pressure in regulatory matters.
Mansur said the asset quality of six banks in the country has been reviewed. Among them, discussions have taken place regarding the merger of five banks. Before any merger, separate discussions will be held with each bank. If any bank can present a valid reason against the merger, their case will be reconsidered.
The governor said in some banks, more than 90 per cent of the loan portfolio has turned non-performing. This has created severe liquidity stress, and in some cases, depositors are facing delays in withdrawing their funds, he said.
Despite these challenges, I want to reassure everyone that depositors鈥� money in all banks is safe, he added. The central bank is committed to protecting the banking system and restoring public confidence.
Mansur also outlined key initiatives being taken to improve regulatory oversight and discipline in the sector. One of the major steps is the implementation of a risk-based supervision (RBS) framework.
Pilot RBS programmes have already started in 20 banks, he said.
The remaining 41 banks will be brought under this supervision system in phases. This approach will allow the central bank to focus on institutions that pose the greatest risks and ensure more effective oversight, he added.
Regarding appointing independent directors, governor said all banks must now appoint independent directors from a panel prepared by Bangladesh Bank.
If any bank wants to appoint someone outside the panel, they must submit an application. After undergoing a 鈥榝it and proper鈥� test, the individual may be added to the approved list, he said.
He said the objective is to ensure that board members are truly independent and competent, instead of being politically connected or personally loyal to bank owners.
