No more dillydallying expected in bank reforms

Some banks in the country have been misappropriating depositors’ money since their inception. Bangladesh Bank, on the other hand, does not appear to be greatly concerned about the wholesale misappropriation that has taken place across the entire banking sector. Although, after the mass uprising, Bangladesh Bank Governor Ahsan H Mansur spoke optimistically about this sector, the expected results have yet to be seen. Last week, in an interview with a news outlet, he said Bangladesh Bank would inject Tk 20,000 crore into bank reforms. The question now is: what has been done about those who have embezzled vast amounts from the very banks into which this Tk 20,000 crore will be channelled for reforms?

In August 2024, when the interim government assumed responsibility, the crisis in Bangladesh’s banking sector had reached its peak and was facing a severe situation. Various weaknesses and a liquidity crisis in the banking sector were having a serious impact on the country’s economy, bringing the urgent need for reform to the forefront. At that time, the banking crisis stood like a skeleton looming over the country, becoming a major obstacle to financial stability and development. Economists, bankers, trade-related experts, and government officials agreed that extensive reforms in the banking sector were necessary. Accordingly, a Bank Reform Commission was formed. Reform activities have begun, but while it is still too early to assess the results, valuable time for reforms is passing.

An international audit completed in May revealed a large capital shortfall in the banking sector. As of December 2024, five banks—First Security Islami Bank, Social Islami Bank, Global Islami Bank, Union Bank, and ICB Islamic Bank—had a combined capital shortfall of around Tk 46,000 crore, which has since increased further.

To address this, the central bank has created a three-tier administrative structure to identify the root causes of asset quality problems, consisting of implementation, project management, and steering committees. A high-level AQR Oversight Committee has also been formed with representatives from the International Monetary Fund (IMF), the World Bank, and the Asian Development Bank (ADB) as observers. However, the activities of these committees have yet to yield encouraging results—primarily because the vast sums looted from banks have not been recovered.

Some reforms have taken place in the banking sector; forensic audits of weak banks have been completed, and steps have been taken to recover laundered money. But it is concerning that, despite financial assistance from Bangladesh Bank, some weak banks still cannot return depositors’ money.

We therefore believe that such irregularities in the banking sector prove the existence of corruption within banking. These audit reports must be used to bring such irregularities to light. If corruption is found, legal action must be taken to bring the perpetrators to justice. Regrettably, the prevailing tendency in the country is to grant leniency rather than bring offenders to trial. To restore discipline in the country’s banking and financial sector, this tendency must be abandoned. Swift reforms are therefore essential to maintain financial stability.