The recent downgrade of Bangladesh's banking outlook by global credit ratings agency Moody's from stable to negative should serve as a deafening wake-up call for us.
For too long, the nation's banking sector has been plagued by issues that have essentially been left unaddressed. While the previous administration’s inaction with regard to systematic siphoning of assets is certainly to blame, we can no longer ignore these issues that threaten the stability of the entire economy.
Indeed, the Moody's report simply confirms what many have long suspected: Our banking system is teetering on the edge.
A major reason for the fragility of our banking sector -- an issue that goes back decades -- is our failure to address non-performing loans (NPLs) which, despite the regime change, have shown little to no signs of abating.
When a significant portion of the nation's capital is tied up in unproductive assets, it is no wonder that its banking sector is unable to provide any modicum of stability. Beyond NPLs also exist the usual issues that, despite efforts from the interim government to reform, will take time to bring about systemic change.
From weak governance, lack of transparency, and inadequate regulatory oversight, these are the issues that have unfortunately seeped into the very culture of our banking sector, and will take significant efforts from every relevant stakeholders to overhaul.
At present, the time for complacency is over, and it is time for action. There is simply no alternative to the government and the Bangladesh Bank making tough, decisive calls to address these systemic issues.
Bangladesh needs a robust and healthy banking sector if it is to become a thriving economy. Ignoring these warning signs will have dire consequences for our future and may set us back further.
Saturday, April 19, 2025
