A comprehensive mandate to repair the financial core

An overwhelming electoral victory is not merely a political triumph; it represents a transfer of authority grounded in public trust. When voters consolidate power in the hands of one government, they reduce political resistance and create space for decisive action. Legislative barriers diminish and policy execution can accelerate. 

Yet expanded authority also sharpens accountability. Political capital is not symbolic; it must translate into measurable outcomes.

Bangladesh stands at a significant turning point. The present mandate provides a rare opportunity to confront structural weaknesses that have accumulated over time. With fewer political constraints, reforms can proceed with greater coherence and consistency. 

However, concentrated authority also raises public expectations. If reform efforts succeed, the economic impact can be transformative. If progress falters, responsibility will be clearly attributed.

At this stage of economic development, banking sector reform is central to stability. Inflationary pressures, foreign exchange strain and global volatility have exposed deeper vulnerabilities within the financial system. The strength of banks directly influences macroeconomic resilience. A sound banking system supports investment and growth; a fragile one magnifies risk and uncertainty.

Several structural challenges require urgent attention. Non-performing loans remain elevated, while recovery mechanisms often lack effectiveness. Governance weaknesses persist in certain institutions. Capital adequacy concerns affect weaker banks. Political influence in lending decisions has undermined credibility. These are not isolated technical issues; they influence investor confidence, business expansion and public trust in the safety of deposits.

When banks fail to allocate credit efficiently, the real economy slows. Small and medium-sized enterprises face financing constraints. Export industries encounter higher costs and reduced competitiveness. Private investment becomes cautious. Over time, weak financial intermediation constrains employment generation and dampens economic dynamism.

A government supported by a strong mandate is positioned to address these weaknesses decisively, building upon corrective measures initiated during the interim administration. Recent merger initiatives among selected banks and the closure of financially distressed non-bank financial institutions (NBFIs) signal a move towards consolidation and greater discipline.

These steps recognise that sustaining chronically weak institutions can amplify systemic risk. Strategic mergers can strengthen capital bases and protect depositors, while the orderly exit of non-viable NBFIs helps contain contagion. The ultimate effectiveness of these initiatives, however, will depend on consistent follow-through and careful oversight by the newly elected government.

Institutional independence remains fundamental to reform success. Regulatory authorities must operate without political interference, and the central bank must exercise operational autonomy in supervision, monetary policy and enforcement. At the same time, autonomy must be accompanied by clear accountability standards.

The central bank should adhere to transparent performance benchmarks, publish comprehensive supervisory data, explain policy decisions publicly and remain subject to parliamentary scrutiny and independent external audits. Regulatory actions must follow documented procedures and be open to legal review to ensure fairness.

Enforcement should be applied uniformly across all institutions, regardless of ownership structure or political connection. Supervisory decisions must be evidence-based and risk-focused. Selective application of rules weakens credibility and distorts competition. Stability depends not only on independence but also on transparency, consistency and measurable institutional performance.

Macroeconomic management is closely linked to financial system health. Effective monetary transmission relies on strong and disciplined banks. Exchange rate stability requires prudent liquidity management. Government borrowing depends on a well-functioning domestic financial market. When banks are unstable, these policy instruments lose effectiveness and economic volatility increases.

External pressures heighten the urgency of reform. Global interest rate movements, shifting export demand and fluctuations in remittance flows are largely beyond domestic control. Internal institutional strength, however, is controllable. A resilient banking system can absorb external shocks, maintain investor confidence and support currency stability. It also strengthens the country's international financial standing.

Governance reform must therefore remain a priority. Transparent financial reporting, rigorous audits, accountable boards and professional management insulated from political influence form the backbone of long-term stability. These safeguards reduce systemic risk and reinforce public confidence in financial institutions.

Digital transformation can further enhance efficiency and inclusion. Secure payment infrastructure, robust cybersecurity frameworks and improved financial data systems can modernise the sector. While Bangladesh has made progress in expanding financial access, technology alone cannot compensate for weak oversight. Sound governance and disciplined credit practices remain indispensable.

Delay carries escalating costs. Rising non-performing loans erode capital buffers. Weak oversight undermines trust. Reduced confidence may trigger capital flight and increase recovery expenses. Financial fragility rarely resolves itself; it compounds over time.

Public expectations are clear and pragmatic. Citizens expect their savings to be secure. Businesses expect fair and merit-based access to credit. Investors expect predictable rules. A strong mandate provides the political space to deliver these outcomes, but that space narrows if decisive action is postponed.

As Bangladesh integrates more deeply into global markets and transitions beyond least developed country status, domestic institutional strength becomes even more critical. Reduced external concessions will require stronger internal resilience. A transparent, disciplined and well-regulated banking system will be central to sustaining competitiveness and stability.

Ultimately, electoral authority creates opportunity, but institutional performance defines legacy. Banking reform is not only about regulatory frameworks; it is about leadership and execution. Success will depend on appointing competent, credible and independent professionals to lead regulatory bodies, state-controlled banks and oversight institutions. Reform at this scale requires experienced regulators, skilled bank managers, capable risk specialists, strong auditors and policy experts who understand both domestic realities and global standards.

The true measure of this government's tenure will not be the size of its mandate, but whether it strengthened the financial system through disciplined policy, institutional integrity and the appointment of the right people to safeguard stability. Authority has been granted. Competence must now be applied with consistency and resolve.

Shah Md Ahsan Habib is a professor at the Bangladesh Institute of Bank Management (BIBM) and chairman of Dnet. He can be reached at ahsan@bibm.org.bd. 

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.