BB closely monitoring activities of reconstituted bank boards

Bangladesh Bank (BB) Governor Ahsan H Mansur on Thursday said the central bank is closely monitoring the activities of reconstituted bank boards and will intervene if necessary.

He warned that unless stricter classification rules are introduced, non-performing loans (NPLs) could rise to 30 per cent.

"We are going to change the classification rules and make them stricter," he said, adding that the central bank is planning fundamental reforms to the Bank Company Act.

Speaking at the 22nd Nurul Matin Memorial Lecture on Ethics in Banking, the governor said, "We are trying to introduce a provision that limits the number of board members from a single family to two and limiting their tenure as well."

The annual event was organised by the Bangladesh Institute of Bank Management (BIBM) on its campus.

Mr Mansur acknowledged that political support will be essential to implement the necessary banking sector reforms.

He criticised the previous regime for fostering a culture of unethical practices, which left the sector in poor shape. "We are trying to correct those wrongs," he said.

He also noted that restructuring weak banks would be a major challenge.

"Some may go into liquidation, and others may need to be merged," the governor said, adding that the central bank is considering appointing foreign experts to facilitate the process.

M Kabir Hassan, a finance professor in the Department of Economics and Finance at the University of New Orleans in the US, delivered the keynote lecture titled "Roots and Repercussions: Unravelling the Ethical Crisis in Bangladesh's Banking Sector."

He identified political interference, collusion, corruption, and weak governance as the key drivers of financial instability in Bangladesh's banking sector.

The professor cited major banking scandals - such as those involving BASIC Bank, Farmers Bank, Sonali Bank, and Islami Bank Bangladesh - to highlight unethical practices like politically influenced loan approvals, wilful defaults, and regulatory negligence.

"These failures have eroded public trust, destabilised the economy, and disproportionately affected small businesses and rural borrowers," he said.

He underscored the need for stronger penalties, independent anti-corruption watchdogs, and enhanced whistleblower protections to address the crisis.

Besides, the professor warned that the consequences of the banking sector's ethical failures include economic instability, reduced foreign investment, rising unemployment, inflationary pressure, and diminished public confidence.

BB Deputy Governor Nurun Nahar and BIBM Director General Dr Md Akhtaruzzaman also spoke at the event.

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