The World Bank Board of Executive Directors has approved $450 million in financing to help Bangladesh strengthen the foundations for a stronger banking sector, a prerequisite for the revival of the country’s economic growth and job creation.
The Financial Sector Support Project II aims to bolster the deposit protection system to protect small depositors and build Bangladesh Bank’s supervisory capacity and systems.
It lays the groundwork for bank resolution and reform of state-owned banks. It will also support the deposit protection fund by increasing its capital and advance key reform priorities, including enhancing the deposit protection system, establishing an effective Emergency Liquidity Assistance framework, developing bank restructuring strategies, and supporting reforms in state-owned banks.
The banking sector faces significant challenges caused by weak corporate governance, regulatory capture, and related-party lending. The non-performing loan (NPL) ratio stood at 32.6% as of the end of March 2026, well above the average for South Asian banks of 7.9%, and the system-wide capital-to-risk-weighted assets ratio was negative 2.6% as of the end of December 2025.
“Bangladesh’s vision of attaining a trillion-dollar economy requires a stable and inclusive financial sector. But the banking sector—which accounts for about 90% of total financial sector assets—faces mounting stress,” said Jean Pesme, World Bank division director for Bangladesh and Bhutan. “This project will help Bangladesh put in place a set of essential tools, systems, and safeguards needed to protect small depositors and support confidence, restore stability in the banking sector, allowing it to support economic growth and job creation.”
It will upgrade and modernize Bangladesh Bank’s Information and Communications Technology (ICT) infrastructure, helping address rising cybersecurity risks and close critical gaps in sector-wide data and analytics. This will improve Bangladesh Bank’s ability to monitor risks, enhance data-driven and risk-based supervision, and improve the resilience of the financial sector.
“The project, which forms part of a coordinated approach by development partners including the IMF and the Asian Development Bank, supports measures to bolster crisis preparedness and build the authorities’ capacity to manage banking sector stress,” said Toshiaki Ono, World Bank Senior Financial Sector Specialist and Task Team Leader of the project.
