Major Shake-Up Planned in 22 Banks

A significant restructuring is reportedly on the horizon for Bangladesh’s banking sector, with authorities considering a major overhaul of the boards of directors of 22 commercial and state-owned banks. Following recent political changes, steps are being taken to make these institutions free from what officials describe as undue influence linked to the interim administration.

According to sources familiar with the development, the boards of these banks may soon be dissolved and reconstituted in a bid to strengthen governance, improve oversight, and restore confidence in the financial system.

After the political transition on 5 August 2024, economist Dr Ahsan H. Mansur assumed office as the Governor of the central bank. Upon taking charge, he initiated a series of reforms aimed at restoring discipline in the banking sector and ensuring better corporate governance. Within six months, several private banks had their boards restructured, while discussions began on merging selected institutions. Among the most notable proposals was the plan to consolidate multiple Islamic banking operations into a single unified Islamic bank.

However, these measures were not without controversy. Critics alleged that some individuals appointed to newly formed boards had previously faced accusations of irregularities and financial misconduct. This led to wider questions regarding the effectiveness and integrity of the governance reforms.

Following the formation of a new elected government on 12 February, the issue of broader banking sector restructuring has once again gained momentum. The Ministry of Finance’s Financial Institutions Division, alongside the central bank, has begun preliminary assessments of the boards of the 22 banks in question.

Sources indicate that where necessary, complete board overhauls may be implemented. Priority will be given to strengthening risk management frameworks, compliance systems, and corporate governance standards. Emphasis is also being placed on appointing professionals with proven expertise in banking, finance, and regulatory practices.

At present, Bangladesh’s banking sector comprises 61 scheduled banks, both public and private. Managing governance across such a large and diverse system remains a major challenge for regulators, particularly in ensuring consistent oversight and accountability.

Overview of the Banking Reform Initiative

Experts argue that the banking sector’s stability is closely tied to the broader economy, making governance reforms particularly sensitive. They caution that appointments based solely on loyalty or political alignment could worsen existing vulnerabilities rather than resolve them. Instead, they stress the importance of transparency, expertise, and adherence to international banking standards.

A spokesperson from the central bank noted that while informal consultations have taken place with various stakeholders, no official decision has yet been announced. However, policy-level discussions are reportedly advancing, and visible changes may emerge in the near future.

Overall, the proposed restructuring of 22 banks could mark a significant turning point for the financial sector. Yet, the success of this initiative will largely depend on whether the process is conducted in a transparent, impartial, and competence-driven manner.