---

Dhaka, July 17 –
Global credit rating agency S&P Global Ratings has reaffirmed Bangladesh’s banking sector as one of the highest risk categories in the Asia-Pacific region in its latest Banking Industry Country Risk Assessment (BICRA), published on Tuesday.

The country received a score of 9.0 on S&P’s 10-point scale, where 1.0 indicates the lowest risk and 10.0 the highest, placing Bangladesh alongside Mongolia, Cambodia, and Vietnam in the region’s most vulnerable group.

The BICRA framework assesses key risk factors including economic and industry risk trends, credit quality, institutional strength, competitive dynamics, and funding resilience. Bangladesh scored particularly low in areas such as credit risk, institutional framework, and corporate governance.

Islamic Banks, Governance Issues Undermine Confidence

According to the report, the sector’s risk level is exacerbated by elevated institutional vulnerabilities and governance lapses, particularly in several Shariah-based banks. S&P cited the 2023–2024 liquidity crisis faced by a number of Islamic banks, which prompted intervention by Bangladesh Bank, including the restructuring of boards, suspension of senior officials, and provision of emergency liquidity support.

“Bangladesh’s banking industry continues to grapple with structural issues such as weak lending standards, poor enforcement of foreclosure laws, and rising defaults,” said Shinoy Varghese, primary credit analyst at S&P Global.

A senior Bangladesh Bank official, responding to the report, said the central bank’s actions were aimed at restoring confidence and ensuring compliance. “Our measures were necessary to stabilize the system, and some banks are already showing signs of recovery,” the official told The Financial Express.

Mixed Performance Across Risk Indicators

Despite its high-risk classification, S&P assigned a ‘stable’ outlook under the economic risk trend sub-indicator. The report acknowledged relatively better performance in system-wide funding stability and manageable economic imbalances, aided by steady remittance inflows and improving deposit growth.

However, these gains have not offset the sector’s chronic structural challenges. In contrast, advanced economies in the region such as Singapore, Australia, and Hong Kong scored 2.0, reflecting robust regulatory regimes and financial resilience. Japan and South Korea followed with a score of 3.0.

Bankers Optimistic but Cautious

Local industry leaders acknowledged the concerns raised but pointed to recent regulatory reforms and macroeconomic improvements.

“The central bank has strengthened oversight, which has helped stabilize the forex market and improve deposit growth,” said Syed Mahbubur Rahman, Managing Director and CEO of Mutual Trust Bank. “Remittance inflows remain robust, but we urgently need stronger private investment to support long-term growth.”

Reform Remains Crucial

Economists believe lasting stability will depend on comprehensive structural reforms. They emphasized the need to address long-standing issues including the high volume of non-performing loans (NPLs), corporate governance gaps, and political influence in banking operations—challenges that have persisted over the last decade and a half.

While regulatory interventions have brought short-term stability to certain institutions, experts warn that unless deeper reforms are implemented, Bangladesh’s banking sector will remain fragile, limiting its contribution to broader economic development.