Written by The Banking Post
Dhaka, July 5 — The Asian Development Bank (ADB) has committed $1 billion in budget support to Bangladesh to accelerate banking sector reforms, with $500 million disbursed this fiscal year and the remainder slated for the next. The funding is tied to 25 reform conditions, including the creation of a financial stability fund to recapitalise distressed banks.
The initiative follows an earlier $500 million allocation approved last month after Bangladesh Bank and the government began implementing key reform measures to address systemic weaknesses stemming from irregularities and governance lapses.
🔍 Reform Milestones Under ADB’s Program
- Asset Quality Reviews (AQRs): Completed for six systemically important banks using standardised templates; reviews for 11 more banks are underway.
- Bank Consolidation: BB has initiated the merger of five Islamic banks into a single entity.
- Legal Amendments: Ordinances for the Bankruptcy Act, Negotiable Instruments Act, and Money Loan Court Act will be submitted to strengthen insolvency and recovery frameworks.
- Stability Fund: BB will finalise and implement a recapitalisation fund, with initial capital provided by the finance ministry.
- Asset Management Companies: BB will establish entities to manage and recover troubled loan assets.
ADB’s technical assistance has supported diagnostic reviews that will guide evidence-based reforms in recapitalisation, resolution planning and governance enhancement.
💬 ADB’s Outlook
The reforms aim to build a resilient and transparent banking system, improve access to finance—especially for SMEs—and align Bangladesh’s financial sector with international standards. ADB expects the changes to restore market confidence and enable more efficient capital allocation across the economy.
