BB unveils major regulatory policy for banks

This initiative seeks to bolster efficiency, strengthen oversight, and align with international best practices, though Governor Ahsan H. Mansur highlighted political interference as a substantial risk to financial good governance. The government will take action in reforming the political sector.

Speaking at a press conference on Monday, Mansur underscored political risk as a major impediment, stating, "Political risk is a big risk to maintain good governance in the financial sector, which happened earlier."

He emphasised the need for politicians to be "corrected and aware of the result of political interference" to mitigate this challenge.

The central bank's revamped approach will involve a comprehensive RBS framework, encompassing policy documentation, risk matrix development, and a model supervisory report to manage inherent risks like credit, market, operational, legal & regulatory, and strategic exposures.

A total 61 banks will be brought under supervision in the new system under 12 groups in the central bank. As a result, real time information of financial risk is possible to monitor from a single umbrella in the central bank.

Already, 20 have been brought under this system, the other banks will come under this system by December 31, 2025.

The governor said that if any trouble is seen in running indepently, then the central will consider it, otherwise they will be brought under state control.

Replying to a query Mansur hints at restructuring the board of some shariah- based banks after reviewing their performance.

Key initiatives underpinning this transformation include:

Organizational Transformation: Restructuring into bank-specific teams and specialized departments such as Supervisory Policy and Coordination, Supervisory Data Management and Analytics, Technology Risk and Digital Banking Supervision, and ML/TF Risk Supervision.

Capacity Building: Conducting targeted training programs for central bank and commercial bank officials, with active collaboration from international partners including the IMF, World Bank, and IFC.

IT Systems Development: Developing a new Rationalized Input Template (RIT) and a centralized supervisory dashboard for data-driven supervision and enhanced analytical capabilities.

Phased Rollout: Following successful pilot programmes, a full rollout to all 61 scheduled banks is slated to begin by July 2025, leading to the full implementation by January 2026.

Enhanced Supervisory Cycle: Introducing a standardized supervisory process covering risk assessment, planning, engagement, intervention, and follow-up.

This extensive overhaul marks a strategic step towards fostering a more robust culture of compliance, risk awareness, and technological innovation within Bangladesh's banking sector, aspiring to enhance the stability and integrity of the financial system and support sustainable economic growth, reports UNB.