BAB urges swift legal recovery of illicit assets to restore confidence in banking sector

The Bangladesh Association of Banks (BAB) has said a meaningful recapitalisation of the banking sector would require stronger recovery mechanisms and decisive actions against owners and groups, who looted money from banks and continue to hold shares and assets within the financial system.

The association also stressed the importance of swift legal recovery, confiscation of illicitly acquired assets, and enhanced enforcement measures to restore confidence in the banking sector and protect depositors' interests.

The association came up with the statement during a meeting finance minister Amir Khosru Mahmud Chowdhury on Tuesday. A delegation of the association met with the minister to discuss key fiscal, regulatory, and structural measures required to strengthen Bangladesh's banking sector ahead of the upcoming national budget.

During the meeting, BAB highlighted the severe challenges currently facing the banking industry, including rising non-performing loans (NPLs), pressure on capital adequacy, weak private sector credit growth, and erosion of public confidence caused by governance failures, prolonged legal recovery processes, and economic uncertainty, according to a press statement.

The association informed the finance minister that the overall Capital Adequacy Ratio of the banking industry has declined to nearly 3 per cent, creating significant stress across the sector and limiting banks' ability to support industrial growth, SME financing, employment generation, and investment expansion.

It also expressed concern regarding certain provisions under Section 18K of the proposed Banking Resolution framework, noting that any perception of allowing controversial former sponsors or major defaulters to return to the banking system could negatively affect depositor confidence, investor sentiment, and the credibility of reforms.

Among the major recommendations placed before the finance minister were a reduction of corporate tax for banks to 30 per cent to support internal capital generation and Basel III compliance, full tax deductibility of loan-loss provisions for five years, the removal of additional taxes on stock dividends to encourage retention of capital.

It also recommended fast-track approval of rights share issues and recapitalisation initiatives, continued access to SME refinance, green financing, LTTF, and other refinance schemes for banks operating under approved recovery plans.

The association stressed the need for stronger coordination between the Bangladesh Bank and the Bangladesh Securities and Exchange Commission (BSEC) to facilitate recovery and capital raising.

It proposed the establishment of fast-track financial courts and a centralised Asset Management Company (AMC) for quicker disposal and management of distressed assets.

The recommendations also included rationalisation of governance provisions under the Bank Company Act, including limiting the definition of family to spouse, dependent children, and financially dependent family members.

The association also proposed expansion of digital interoperability and Bangla QR adoption to support a modern cashless financial ecosystem.

BAB reiterated its commitment to supporting the Government's reform agenda and expressed its willingness to work closely with all stakeholders to restore confidence, strengthen governance, and ensure long-term stability in Bangladesh's banking sector.

The meeting was attended by Mr.Abdul Hai Sarker, Chairman of Bangladesh Association of Banks (BAB), and the Vice Chairmen of BAB; Mr.Romo Rouf Chowdhury, Chairman of Bank Asia PLC, Mr. Sharif Zahir, Chairman of UCB Bank PLC, Mr.Monzurur Rahman, Chairman of Pubali Bank PLC and Mr. Rashed Ahmed Chowdhury, Chairman of Mutual Trust Bank PLC., along with the chairmen and senior representatives of several leading private commercial banks in Bangladesh.