Banking sector crisis too deep to fix in 14–16 months: Finance Advisor

Bangla Press Desk: Country’s banking sector is facing a deep structural crisis that cannot be resolved within 14 to 16 months, Finance Advisor Dr. Salehuddin Ahmed said on Thursday.

Speaking at a roundtable discussion titled “Banking Sector Reforms” held at a hotel in the capital, he said years of accumulated weaknesses and irregularities have severely undermined the sector, making rapid reform unrealistic.

“The banking sector is under serious challenge. Many institutions have become weak, and there is a widespread disregard for laws and regulations,” Dr. Salehuddin said. In many cases, he noted, bank owners directly control management without following established rules. “The problems that have accumulated over the last 15 years are deep and complex. They cannot be resolved in just 14 to 16 months.”

On the issue of Bangladesh Bank’s autonomy, the Finance Advisor emphasized that independence is essential for effective central bank operations, but it must be accompanied by accountability. “Autonomy without accountability is neither realistic nor desirable. No central bank can function beyond the sovereignty of the state,” he said.

Citing international assessments, Dr. Salehuddin said global reports have identified money laundering, trade-related crimes, and inflation as major risks for countries like Bangladesh. These factors directly affect banking sector stability, requiring Bangladesh Bank, with support from the Ministry of Finance, to play a stronger role.

He also sharply criticized the audit system, saying some chartered accounting firms have signed audit reports without proper scrutiny. “By endorsing backdated or questionable reports, certain auditors have seriously damaged financial discipline,” he said, adding that several audit firms have already been blacklisted.

Dr. Salehuddin warned that financial irregularities extend beyond the banking sector, noting that significant financial activities in other areas, including higher education, often remain outside proper audit frameworks.

Regarding legal reforms, he said the government has recently amended the Negotiable Instruments Act and the House Building Finance Corporation Act, while amendments to the Prevention of Money Laundering Act and the Financial Loan Court Act are underway. However, time constraints remain a major challenge.

“We have very little time, but we are trying to advance reforms as much as possible,” he said, noting that steps have already been taken to rationalize the number of additional senior officials at Bangladesh Bank as part of structural reforms.

Despite the challenges, Dr. Salehuddin said Bangladesh’s international image remains positive. “The perception abroad is not that Bangladesh is collapsing,” he said, though development partners acknowledge that the current situation is difficult.

Emphasizing the importance of banking sector reform for the broader economy, he said the opportunity must not be wasted. “If all reforms cannot be completed now, the next government must carry them forward. There is no room for delay.”
BP/TI