Bangladesh banking sector needs comprehensive reforms, say speakers at dialogue

Bankers, financial experts, and public officials convened in Dhaka on yesterday (29 April) to call for comprehensive reforms in Bangladesh's banking sector in light of global economic shifts and internal systemic vulnerabilities.

The dialogue, titled "Global Financial Trends and Reforms: Implications for Bangladesh," was organised by the International Chamber of Commerce, Bangladesh (ICCB), and held at a city hotel.

Discussions were set against the backdrop of evolving global financial dynamics—including the potential impact of US tariffs—and alarming findings from the World Bank's recent Bangladesh Development Update, which underscored deep-rooted weaknesses in the country's financial system.

Mahbubur Rahman, president of ICC Bangladesh, warned that the full implementation of US tariffs could severely impact Bangladesh's banking system by reducing export earnings, tightening foreign currency liquidity, and increasing non-performing loans (NPLs), particularly in trade-reliant sectors.

"It is imperative for Bangladesh to adopt resilient financial strategies and regulatory reforms that safeguard economic stability against such external shocks," Rahman said.

He added that despite resilience in several economic areas, the structural frailties within the financial sector remain a major challenge.

Citing the World Bank report, Rahman noted that gross NPLs have doubled to over Tk2.9 trillion, with nearly half concentrated in nine state-owned banks.

He pointed to capital shortages, weak adoption of international standards, and an inadequate legal framework for loan recovery as critical issues in need of immediate reform.

"The recent reform initiatives by the interim government and Bangladesh Bank are beginning to uncover the full extent of these risks. The message is clear—reform is not optional, it is essential," he stated.

ICC Vice President AK Azad called on the International Chamber of Commerce (ICC) and the World Trade Organization (WTO) to address the repercussions of US tariff policies on countries like Bangladesh.

He also emphasised the need for international support in settling insurance claims for factories damaged during political unrest, and urged the central bank to liberalize the exchange rate regime.

Florian Witt, chair of the ICC Global Banking Commission, echoed the need for structural reforms.

In his keynote address, he proposed the recapitalisation of state-owned banks and a strategic reduction of NPLs. He also recommended facilitating mergers to create stronger banking entities, conducting forensic audits of troubled banks, and strengthening Tier-1 capital.

Witt highlighted the importance of adopting international standards for NPL categorisation and noted the shifting future of banking toward the Global South.

Deputy Governor of Bangladesh Bank Md Zakir Hossain Chowdhury remarked that while the central bank has recently undertaken numerous reforms, it is too early to assess their outcomes.

He affirmed that Bangladesh Bank continues to consult with stakeholders, the private sector, and development partners.

Abdul Hai Sarker, chairman of the Bangladesh Association of Banks and Dhaka Bank PLC, expressed optimism that coordinated efforts among stakeholders could help Bangladesh navigate emerging global challenges.

Selim RF Hussain, chairman of the Association of Bankers Bangladesh (ABB), described the current phase of globalisation—"Globalisation 2.0"—as markedly different from previous eras, shaped by fast-evolving geopolitical realities. "Small countries like Bangladesh may not influence these global shifts, but they must respond collectively and decisively," he said.

Enamul Huque, managing director of Standard Chartered Bank Bangladesh, suggested that Bangladesh shift focus toward high-value apparel items such as manmade fiber (MMF) to remain competitive amid tariff pressures.

Md Mahbub Ur Rahman, CEO of HSBC Bangladesh, observed major changes in the global supply chain, including increased south-south trade.

He emphasised the need for Bangladesh to strengthen infrastructure, logistics, and supply chain mechanisms.

He also flagged imbalances in trade practices, noting that many businesses import goods using letters of credit (LCs) while exporting based on contracts.

Shah Md Ahsan Habib, professor at the Bangladesh Institute of Bank Management (BIBM), highlighted the uniqueness of Bangladesh's banking challenges, cautioning against wholesale adoption of developed countries' practices.

"Our financial literacy and risk management capabilities are still evolving," he said, though he acknowledged that several banks and businesses are performing well and offer models worth replicating.

Bidyut Kumar Saha, lead investment officer at the Asian Development Bank (ADB), emphasised that many of the sector's vulnerabilities are internal. "Regardless of global developments, the ongoing reforms by the government and the central bank must continue in full force," he said, reiterating ADB's commitment to supporting these efforts.

The event concluded with remarks from ICCB Secretary General Ataur Rahman, reaffirming the organisation's support for inclusive dialogue and collaborative reform to ensure a stable and competitive financial future for Bangladesh.