Debtors not protected by restraining orders, reveals Central Bank president
In an effort to address the deep-rooted corruption and systemic failures that have plagued Bangladesh's banking sector over the past 16 years, the government has launched a series of reforms under the leadership of Ahsan H Mansur, the newly appointed Bangladesh Bank governor.
The critical condition of the banking sector, with over a dozen banks and financial institutions unable to repay depositors, has been identified as a result of corruption and state-level failures [2]. To tackle these issues, Governor Mansur has been actively engaged in restructuring the sector since taking office.
The government has established three dedicated taskforces to address the state of the banking sector. The first taskforce, the banking sector reform taskforce, is leading an Asset Quality Review. This review found that some banks have up to 98% of their loan portfolios classified as non-performing [2]. In response, the restructuring of five banks may require around Tk15,000-20,000 crore initially [3].
The second taskforce is focused on strengthening Bangladesh Bank itself. The government aims to amend the Bangladesh Bank Order to clearly define its objectives, with inflation control being the primary goal [3]. A stronger joint advisory committee, comprising the Bangladesh Bank and the finance ministry, will set the inflation target and policy guidelines, with politics having no place in this process [3].
The government also intends to revise the Money Loan Court Act to improve loan recovery [3]. Additionally, the Bank Company Act will be amended, requiring bank directors to pass a "fit and proper" test and reducing the number of family members allowed on a bank's board [3].
The third taskforce is working to recover funds laundered abroad [3]. Transaction advisers will be appointed to promote the restructured banks to potential investors, with the Bangladesh Bank overseeing the selection of these advisors [3].
Governor Mansur has emphasized progress in the restructuring efforts to revive failing banks and restore health to the banking system [2]. He has also stated that stay orders or legal obstacles will not protect defaulters in the banking sector, implying stricter enforcement against corrupt loan defaulters and those who looted the banks [2].
The government is planning to amend the Bangladesh Bank Order to clearly define its objectives, with inflation control being the primary goal [3]. The government will make the initial investment through the budget or by issuing recapitalization bonds [3]. The government is confident of attracting foreign investors for the restructured banks, with early interest already emerging [4]. The government plans to sell shares of the restructured banks to local and foreign investors, with shares floated on the stock market [4].
In conclusion, the reforms aim to strengthen oversight, accountability, and financial health to restore public trust in Bangladesh’s banking sector [2]. The mergers of the banks are expected to be completed within six months [4]. With these comprehensive structural reforms, enhanced governance, and legal measures, the government hopes to hold corrupt actors accountable and recover from long-term corruption and failures in the banking sector.
- The restructuring efforts led by Governor Mansur, aiming to revive failing banks and restore health to the banking system, also involve strengthening Bangladesh Bank's objectives, primarily focusing on inflation control, while ensuring politics plays no role in the process.
- The government's reforms in the banking sector, intended to address systemic failures and corruption, involve amending various financial laws, such as the Money Loan Court Act and the Bank Company Act, which will introduce stricter regulations for loan recovery and bank governance respectively.
