In a major shift aimed at reforming the banking sector, Bangladesh Bank Governor Dr. Ahsan H. Mansur announced that the country’s Islamic banks would be merged into two large institutions. This consolidation effort is part of a broader plan to overhaul the banking system, improve efficiency, and address the ongoing challenges faced by smaller and troubled Islamic banks.
The Governor made these remarks during his opening speech at the annual banking conference of the Bangladesh Institute of Bank Management (BIBM) on Wednesday. Speaking to an audience of industry leaders, he emphasized that this move would strengthen the Islamic banking sector by consolidating its resources, allowing for better governance and oversight.
Dr. Mansur also highlighted ongoing efforts with foreign organizations to trace and recover laundered money. He stressed that both legal and moral actions would be taken to ensure that those involved in money laundering face significant consequences. “Those who laundered money will have their lives made difficult,” he stated, signaling a tough stance on financial misconduct. He called for the support of all concerned parties in tackling these issues effectively and ensuring that money laundering is deterred in the future.
The Governor outlined several other key reforms underway in the banking sector. He stated that Bangladesh Bank was taking steps to enhance the autonomy of the central bank, emphasizing that it should not be involved in the day-to-day operations of banks, but rather focus on oversight and ensuring that boards and management are fulfilling their responsibilities. The central bank is also implementing a fully automated reporting system to monitor banking activities and identify problems before they escalate.
Regarding the merger of Islamic banks, Dr. Mansur explained that the sector currently consists of one large bank and several smaller, troubled banks, many of which face significant financial challenges. The decision to consolidate these smaller institutions into two larger banks is aimed at improving the stability and overall performance of Islamic banking in Bangladesh. New laws and supervisory systems will also be introduced, following global best practices, to ensure that these merged institutions operate effectively.
On the broader banking reform agenda, the Governor acknowledged the capital deficits plaguing many troubled banks, describing their conditions as “very bad.”
He emphasized that it would take a few years to resolve these issues and restore financial health to these institutions. For these reforms to succeed, he stated, political support is crucial, as changes in government and political dynamics can influence the direction of banking reforms. Maintaining the central bank’s autonomy in the face of political changes will be vital to the success of these efforts.
The Governor’s remarks reflect a strong commitment to strengthening Bangladesh’s banking sector, addressing systemic challenges, and ensuring the long-term stability of the country’s financial institutions. The proposed reforms, including the Islamic bank mergers and enhanced regulatory measures, are expected to reshape the landscape of banking in Bangladesh in the coming years.
