Central bank about to attain long-cherished autonomy as regulator

Bangladesh Bank is set to become a much-envisaged independent regulatory body for the banking sector as the central bank prepares to place the agenda to the advisory council of the interim government this week.

Along with the bank mergers-related roadmap, the banking regulator has taken all necessary preparations to present the Bangladesh Bank Order Amendment 2025 to get final approval from the advisory council led by chief adviser of the interim government and Nobel-laureate Professor Muhammad Yunus, sources at the BB and the Ministry of Finance said.

After series of meetings, the sources said, the board members of the central bank reached a consensus on the full autonomy of the regulator couple of weeks ago before approaching for the final approval from the highest body of the government.

The moves are seen as very critical to revival of the country's fragile financial sector, which is in the main spirits of the ongoing reform recipes being implemented by the post-uprising government.

On another ground, these are also vital because full autonomy of the central bank is one of the major conditions set by the International Monetary Fund (IMF) in its US$5.50-billion lending package meant to stabilise Bangladesh's macroeconomic situation.

Seeking anonymity, a BB official has said they plan to place the proposed Bangladesh Bank Order Amendment to the upcoming meeting of the advisory council to replace the decades-old Bangladesh Bank Order 1972 under which the central bank so long functions.

The official says the BB authorities under the leadership of its governor Dr Ahsan H. Mansur will also place the proposed bank-merger roadmap before the highest policy-making platform of the interim government.

"We're hopeful of getting our two major reform proposals approved," the central banker told The Financial Express.

On condition of not being quoted by name, another BB official has said the BB governor, along with the finance adviser, will leave for Washington to attend the annual meetings of the World Bank and the IMF on October 11.

"Before their departure, the issues are expected to be settled. We've heard that the chief adviser is very positive about such reform initiatives," the BB official said, adding that an IMF mission is scheduled to arrive in Dhaka on October 29 for a two-week review of progress made until June last on the financial-sector overhaul on their wish-list.

The banking regulator has made the move to have the BB Ordinance 1972 amended aligned with the International Monetary Fund's recommendations that will help shield the central bank from political interference and align its governance with global best practices.

According to the proposal on banking-governance upgrade, the President will appoint the governor and deputy governors while also removing government representatives from the board. At present, the board draws three government representatives.

The proposal says the paid-up capital of the central bank will be increased to Tk 1.0 billion in place of Tk 30 million which was fixed during its inception in 1972 after the birth of Bangladesh.

Former lead economist of World Bank's Dhaka office Dr Zahid Hussain hailed such developments, saying that the legal framework of the central bank's autonomy would be strengthened if the proposal was approved.

He said it was a kind of tool the government would give the regulator to exercise the greater autonomy for better outputs with upgrading status and protection of governor and their deputies.

"But we well get benefits once it (the autonomy) translates into the behavioral changes of others like cabinet members, ministry officials and political leaders," he said.

"Please don't assume that we reached the top level just giving the autonomy. We have many obstacles to overcome," the noted economist said.

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