Bangladesh Banks Transition to Risk-Based Supervision

Bangladesh Bank is ushering in a transformative era in banking supervision by transitioning from traditional oversight methods to a comprehensive Risk-Based Supervision (RBS) framework. Under this new approach, the intensity and focus of regulatory scrutiny will be tailored according to the risk profile of each bank and financial institution, marking a significant shift from the uniform supervision previously applied across the sector.

Originally scheduled to take effect on 1 January 2026, the rollout was postponed by one week in observance of national mourning following the passing of former Prime Minister Khaleda Zia. The RBS framework is now set to be fully operational from Sunday.

As part of the reform, Bangladesh Bank has expanded its supervisory structure. The total number of divisions has increased from 13 to 17. Of these, 12 divisions will continue to monitor conventional banking activities, while five specialised divisions will focus on emerging risks. The specialised divisions include Technology and Digital Banking, Information Management and Analytics, Policy Development, Payment Systems Supervision, and Anti-Money Laundering & Countering the Financing of Terrorism (AML/CFT). The AML/CFT unit will operate in alignment with the Bangladesh Financial Intelligence Unit (BFIU) model.

Banking officials note that the RBS model enables a dynamic assessment of risk, moving beyond the compliance-based focus of the previous system. Rather than merely ensuring adherence to rules, RBS evaluates business models, governance structures, and an institution’s capacity to manage future risks. This targeted supervision allows for quicker identification and mitigation of vulnerabilities, thereby reducing the likelihood of systemic crises.

New Supervision Structure under RBS

The primary objectives of RBS are to enhance financial stability, safeguard depositors, and strengthen the overall resilience of the banking sector. Additionally, Bangladesh Bank plans to implement International Financial Reporting Standard IFRS 9 by 2028, aligning domestic banks with global accounting and risk assessment standards.

Experts are optimistic that risk-based supervision will significantly improve governance and accountability within the sector. By allocating resources and regulatory attention where risks are greatest, Bangladesh is poised to develop a transparent, stable, and crisis-resilient banking system.