Cenbank board clears amended BB Ordinance, ending political control on key appointments
President, not the govt, will appoint governor and deputies; BB to gain full budgetary and financial control
The Bangladesh Bank's board has approved the draft amendment to the Bangladesh Bank Ordinance 2025, introducing major changes in key appointments, mandate, and financial management to shield the central bank from political influence.
The ordinance, which will replace the Bangladesh Bank Order of 1972, has been sent to the finance ministry to be placed before the Advisory Council for final approval, according to central bank officials.
The Bangladesh Bank move to amend the Ordinance, aligned with the International Monetary Fund's recommendations, aims to shield the central bank from political interference and align its governance with global best practices.
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Under the draft, the president will appoint the governor and deputy governors. While the amendment initially removed government representatives from the board, the final version retained one, according to central bank sources. At present, the board includes three government representatives.
Muhammad A (Rumee) Ali, former deputy governor of Bangladesh Bank, told TBS that the move was necessary, citing 15 years of experience showing significant political pressure in the banking sector.
He said changing the board composition and giving the president authority to appoint governors and deputies would strengthen governance.
The central bank's control over monetary policy is crucial for managing inflation and financial stability. Also, it should have full independence over bank mergers, layoffs, licensing, and other actions to ensure discipline in the sector, Ali said, pointing out previous political pressure in such matters.
"The new ordinance will give the central bank the protection it needs to do its job," he added.
A senior central bank executive, requesting anonymity, told TBS that the amendment will hold central bankers accountable for failures in monitoring and controlling inflation.
He said many central bankers, including governors, should have faced jail or job loss due to massive banking sector corruption, as they were responsible for failing to identify misdeeds.
However, none were penalised even when banks collapsed due to political interference, as they could claim a lack of independence. "From now on, they cannot use that excuse," he said. "With full independence, the government can hold them liable for failing to control inflation."
Citing the Federal Reserve as an example, he said the US president cannot force the central bank to cut interest rates or fire its head because of its independence. In Bangladesh, the government imposed a single-digit lending rate in 2020, ignoring the central bank's advice, which disrupted macroeconomic stability and fueled inflation, leaving the bank unable to control it.
The new ordinance grants full independence over monetary policy, as the Monetary Policy Committee will function autonomously. Moreover, the governor will no longer owe loyalty to the political government, as appointment and dismissal will not be politically influenced. This gives the governor and deputies the legal authority to make decisions aligned with their mandate without fear of political pressure, the central bank executive added.
Currently, the Bangladesh Bank Order, 1972, grants the government significant control over key appointments, raising concerns about undue influence. The new system introduces robust safeguards.
Key reforms under the amended ordinance
According to the draft, under a "double-layer" system for governor's appointment, a search committee will be formed, and the president will give the final approval. Decisions will be taken by a majority vote of the members present at the search committee meeting, and in the event of a tie, the presiding member will have the power to cast a second or casting vote.
According to the draft ordinance, the government is legally restricted from dismissing the governor at will; the governor can only be removed through the same process used for removing a Supreme Court justice, which is a complex constitutional procedure.
The governor's post will be upgraded from secretary to ministerial status.
The draft introduces major changes, including the restructuring of the Bangladesh Bank's board and the Monetary Policy Committee, with limited government officials' involvement.
It also clearly defines the Bangladesh Bank's mandate to ensure price and financial stability, granting it full policymaking, financial, operational, and personnel autonomy. Under the proposed ordinance, the Bangladesh Bank will become a statutory organisation.
The ordinance was prepared in line with recommendations from the International Monetary Fund (IMF) as part of its $4.7 billion loan package, aiming to provide legal safeguards for the Bangladesh Bank's institutional, functional, financial, and personal autonomy, shielding it from undue political and private sector influence.
Structure, mandate, and autonomy of BB
Under the proposed ordinance, the president will form a six-member search committee to recommend candidates for governor and deputy governors. The committee will include a former finance minister (chairperson), a former Bangladesh Bank governor or deputy governor, the comptroller and auditor general, the chairperson of the Public Service Commission, and two eminent citizens with expertise in economics, banking, or finance – at least one of whom must be a woman. The president will appoint the governor, who will hold ministerial status.
The governor, deputy governors, and non-executive directors can only be removed by the Supreme Judicial Council for disqualification or gross misconduct.
The ordinance clearly defines Bangladesh Bank's mandate to maintain financial stability and grants it sole authority to regulate and supervise all banks and finance companies, accountable to parliament but independent of government influence.
Full autonomy covers policymaking, financial management, operational control, and personnel decisions.
The bank will manage its budget, allocate profits, and oversee monetary policy, financial supervision, and foreign exchange without interference.
Direct government financing is restricted. Interest rates will be set by an independent Monetary Policy Committee.
The board will comprise the governor, two deputy governors, and five or six independent non-executive members with at least 15 years of relevant professional experience.
