From political shackles to financial clarity: A new era in Bangladeshi banking sector

 As Bangladesh edges closer to the formation of a new government, a quiet anticipation hangs in the air, "A new regime after long sixteen years? Oh great, let's see how this turns." While focusing on the financial sector, the banking industry has operated under the long shadow of a single political legacy for sixteen years, shaped by decisions and pressures that often blurred the line between governance and finance. 

Therefore, the big question looms: could a change at the top finally wide open the door to a banking system that is stable, accountable, and politically neutral?

An intertwined legacy: Banking sector & politics

If one looks back through the past regime, some banks and financial institutions did not merely function as financial institutions; they often felt like extensions of political authority. Loan approvals, management appointments, and strategic decisions frequently reflected political motivations more than economic foresight. The consequences are evident even today amidst the mounting non-performing loans, flickering investor confidence and a nagging sense that hindered the country's economic stability. Breaking old shackles is never easy while asking any bank to shake off years of political entanglement. The belief that financial institutions serve political interests instead of the public has damaged their credibility and stunted their growth. For the sector to truly thrive, politics and banking must finally learn to walk their own separate paths.

A chance to reset: Political neutrality

With a new government on the horizon, a rare opportunity presents itself. Regardless of its ideology or composition, a fresh administration has the power to rewrite the narrative. When a banking system is anchored in public trust, led by professionals selected for competence rather than connections, and guided by policies designed to strengthen, it cannot but ensure financial stability. 

But political neutrality cannot be achieved by decree alone. It requires a shift in mindset. Politicians must see the value of a financially independent banking sector, and bankers must embrace their role as guardians of economic integrity. Nothing but a genuine partnership, built on transparency and shared responsibility, can bring real progress.

A framework of trust: Regulatory reforms 

At the heart of this transformation lies the need for stronger regulatory safeguards. Bangladesh Bank, the country's central bank, must be empowered to operate with greater autonomy and authority. Establishing clear and transparent regulations, alongside professional boards consisting of qualified independent directors in commercial banks, is very important towards rebuilding trust within the financial sector. Moreover, the integration of comprehensive internal audits—including a built-in forensic audit system with skilled manpower—along with a Risk-Based Supervision (RBS) framework, will greatly enhance oversight and accountability. 

Implementing an Expected Credit Loss (ECL) model in accordance with IFRS 9, while ensuring alignment with global banking standards, will further enhance the foundation of credibility and trust. These measures collectively will create a more resilient financial environment that not only will meet regulatory expectations but also will foster confidence among stakeholders and the wider community.

Reform, however, should not be confined to boardrooms and policymaking area. Intense engagement of civil society, business leaders, and private sector can ensure that reforms are not only technically sound but also socially grounded, widely accepted and sustainable as well.

A delicate balance: Change and stability

Though the nation looks toward reform, one fact cannot be ignored: too much change too quickly can be destabilizing. A sudden overhaul of banking policies could unsettle markets, worry investors, and disrupt financial operations. To achieve meaningful reform within the organization, it is essential to ensure stability by extending the tenures of appointed independent directors. This extension will allow them to effectively fulfill their responsibilities, particularly in light of findings from internal and forensic audits. Moving forward, these efforts must be closely aligned with decisive actions taken against individuals involved in serious irregularities and lapses, particularly those in collaboration with previous sponsors or directors who have acted more like de facto owners than responsible stewards for depositors' interests.

Long-term strategies, insulated from political cycles and election-year impulses, will be key. A steady, predictable approach will reassure both domestic and foreign investors that Bangladesh remains a reliable place to do business. A delicate balance between continuity and transformation will determine the future strength of the banking sector.

The coming years may prove to be a turning point for Bangladesh because the country stands at a moment where political transition could either reinforce old patterns or steer in a more professional, independent, and trustworthy financial system. Ultimately, the future of banking in Bangladesh will depend on one essential principle: integrity. With clear-eyed leadership, consistent regulatory frameworks, and a renewed dedication to public trust, the banking sector could finally become a pillar of stability supporting the nation's growth towards creating governance.

As the nation waits for its next chapter to unfold, one thing is clear: the intersection of politics and finance will shape not only the banking industry but also Bangladesh's broader economic destiny. All we can hope is that, unlike the previous political legacy, the balance will tilt toward transparency, professionalism, and a more secure future for all.

Dr. Md. Touhidul Alam Khan is Managing Director & CEO of NRBC Bank PLC and the fellow cost & management accountant of ICMAB