'IFRS adoption to boost investor confidence, reshape Bangladesh's banking landscape'

Bangladesh's decision to implement International Financial Reporting Standard 9 (IFRS 9) by 2027 is a major step towards enhancing financial transparency, risk management, and governance, modernising the banking framework. This move is expected to boost investor confidence and attract portfolio investments, particularly in listed banking entities, said Sanath Manatunge, global managing director of Commercial Bank of Ceylon (CBC) PLC, in an interview with The Business Standard's Jebun Nesa Alo. 

IFRS 9 is an accounting standard that implements a forward-looking expected credit loss (ECL) model to govern the classification, measurement, and impairment of financial instruments, enhancing transparency and risk management in the financial sector.

Sanath Manatunge said CBC is committed to leading this transformation with cutting-edge technology, financing green projects and ensuring compliance. He also discussed future banking industry challenges and how CBC plans to navigate them. Below is the Q&A from the interview:

How have recent challenges in Bangladesh's financial sector impacted CBC's Bangladesh operations?

With a 105-year legacy and 22 successful years in Bangladesh, the CBC has consistently maintained its position as a leader in financial stability, risk management, and service excellence. 

Over the past four years, our balance sheet has doubled, while maintaining the lowest loan classification ratio in the industry, demonstrating our resilience and prudent risk management practices.

Despite Bangladesh's financial sector's economic and regulatory challenges, CBC has continued to perform strongly. Amid foreign exchange constraints, we have honoured all trade commitments without delays, reinforcing our clients' trust. In 2024 alone, we facilitated nearly $2 billion in cross-border trade.

Despite stresses faced by the banking industry, CBC Bangladesh maintained a robust 51.57% capital adequacy ratio (CAR) at the end of the last year, ensuring full compliance with regulatory standards. Our asset quality remains exceptional, with a non-performing loan (NPL) ratio of just 0.60%, compared to the industry average of 16.93%.

These achievements highlight CBC's commitment to sustainable growth, financial stability, strong governance, and client-centric banking in Bangladesh.

What role do foreign banks like CBC play in supporting Bangladesh's economic growth?

As a regional foreign bank, CBC plays a key role in driving economic growth, financial stability, and foreign trade in Bangladesh. With our Sri Lankan roots, we leverage cultural insight to understand market dynamics and serve clients effectively. CBC has built a strong brand, supported by 14 consecutive years of AAA credit ratings, reflecting our financial strength and stability.
Our strong foreign currency deposits position CBC as a major player in forex transactions, trade finance, and liquidity support, stabilizing the interbank market. We also contribute to market liquidity by participating in Call money and Repo markets against government securities.

In addition to financial contributions, CBC is committed to ethical banking, with zero tolerance for financial crimes, money laundering, and corruption. Our significant investment in talent and professional development ensures a skilled and ethical workforce.

Through these efforts, CBC remains a trusted partner in supporting Bangladesh's financial stability and long-term economic growth.

What trends are emerging in Bangladesh's banking sector, and how is CBC preparing to tackle them?

Bangladesh's banking sector is undergoing significant transformation, driven by AI, fintech, and digital banking, aligning with our strategic priorities. 

Regulatory changes and liquidity challenges, with a shortfall exceeding Tk1 trillion, are reshaping operations while rising NPLs at 16.93% and slowing private sector credit growth at 7.22% add financial strain. Sovereign credit rating downgrades have also affected foreign credit lines and international trade.

Despite these challenges, Bangladesh remains a high-potential market, and CBC is well-positioned to navigate them. With experience in Sri Lanka's economic recovery, CBC applies crisis management and strategic adaptation to Bangladesh's evolving landscape.

Our focus includes strengthening liquidity management, expanding digital banking to drive financial inclusion, and enhancing governance and compliance to build trust in the banking sector. 

By leveraging innovation, risk-conscious strategies, and sound governance, CBC aims to support Bangladesh's long-term financial resilience and growth.

What key lessons has CBC gained from operating in multiple countries, and how are they relevant to its operations in Bangladesh?

CBC's global presence enhances adaptability, strengthens risk diversification, and drives customer-centric innovation for greater financial inclusion and resilience.

Each market presents unique challenges, from regulatory changes to economic volatility, requiring proactive risk management and compliance strategies. In Bangladesh, these lessons have strengthened our focus on supporting and increasing engagement with customers, maintaining asset quality while pursuing sustainable growth, building strong liquidity buffers to navigate potential economic downturns and engaging with regulators to align with evolving financial frameworks

By leveraging global expertise while respecting local market dynamics, CBC continues to deliver world-class banking solutions tailored to Bangladesh's economic aspirations.

What lessons can Bangladesh's banking sector learn from global best practices?

Bangladesh's banking sector can enhance resilience through digital transformation, integrating AI, blockchain, and fintech to boost efficiency and reduce losses. Strengthening cybersecurity and fraud prevention is essential for secure digital transactions.

Expanding financial inclusion is crucial, with alternative credit scoring and microfinance supporting SMEs and rural communities. Digital banking models can bridge the gap between underbanked and unbanked populations.

A focus on sustainable and ESG-driven banking will drive long-term growth. Paperless operations, green financing, and compliance with global ESG standards can enhance credibility and environmental responsibility.

Cross-border banking innovations like blockchain-based trade finance can improve transaction security and transparency, strengthening global integration and financial stability.

By incorporating these global best practices, Bangladesh's banking sector can build greater stability, customer trust, and long-term growth potential.

What are your thoughts on Bangladesh's plan to implement IFRS 9 by 2027?
Bangladesh's move to implement IFRS 9 by 2027 is a significant step toward enhancing financial transparency, risk management, and governance.

As a foreign bank, CBC already complies with IFRS 9 under our Head Office's global standards, alongside Bangladesh Bank's regulations. Therefore, this transition will not pose a challenge for us. 

The adoption of IFRS 9 will bring improved financial stability through the Expected Credit Loss (ECL) model, greater transparency and comparability in financial reporting and stronger risk assessment frameworks.

However, the industry may face implementation complexities and data management challenges, a potential increase in loan-loss provisions, impacting profitability and the need for extensive training to build capacity among banking professionals as well as auditors and regulators.

What is your vision for Bangladesh's banking future, and how does CBC align with it?

The future of banking in Bangladesh will be shaped by a cashless, digital-first ecosystem, with MFS, instant payments, and AI-driven fraud prevention enhancing efficiency and security.

Financial stability will strengthen through consolidation, IFRS 9 and Basel III adoption, and stricter AML/CFT compliance to improve governance and transparency.

A focus on sustainable and inclusive banking will drive green financing, ESG investments, and expanded services for SMEs and unbanked communities.

At CBC, we are committed to leading this transformation by integrating cutting-edge technology to enhance customer experience, financing climate-friendly projects to support sustainable growth and fostering regulatory collaboration to ensure compliance and innovation.

As Bangladesh positions itself as a regional financial hub, CBC remains committed to shaping the future of banking with innovation, resilience, and sustainability at its core.