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Bangladesh Bank (BB) has issued framework for ensuring a smooth and effective transition to the RBS (risk-based supervision) in the banking system to be implemented from next month.

Directing all the country’s commercial banks to comply with the framework, the central bank issued a circular on Sunday with setting out the operational, supervisory and reporting arrangements applicable from the commencement of the RBS from January, 2026.

In view of the increasing globalisation of financial services, rapid technological advancement, product innovation, and heightened interconnectedness of financial institutions, the complexity of banking operations and the overall risk profile of banks have significantly increased, it said.

Traditional compliance-based supervision, which primarily emphasises rule-checking and reliance on historical data, is considered no longer sufficient to proactively address these evolving challenges and risks, it said.

“In this context, BB has decided to implement RBS which is expected to strengthen forward-looking assessment of risks and the effectiveness of risk governance, promote enhanced risk awareness, accountability and prudent risk culture across banks, and support sustainable innovation while safeguarding overall financial stability,” the circular stated.

Under this framework, it instructs that all banks are required to operate, maintain and strengthen their systems, internal controls, and governance structure in conformity with the supervisory expectations mentioned in the SPCD (Supervisory Policy and Coordination Department) circular issued on 23 October, 2025.

“This circular shall be applied to all scheduled banks operating in Bangladesh and shall cover all business lines, functions, and activities that have a material impact on a bank’s overall risk profile,” it said.

Under the RBS framework, the circular mentioned that supervisory assessment shall be grounded in a structured evaluation of a bank’s inherent risks, inter alia, credit, market, operational, legal and regulatory, strategic, ML/TF, technological, and other emerging risks relevant to the bank’s operation and risk exposures, the effectiveness of the bank’s risk governance arrangements, effectiveness of internal control and risk management systems and implementation of risk mitigation measures.

Supervision under RBS shall be forward-looking, with emphasis on early identification and evaluation of emerging risks; continuous in nature through a combination of off-site monitoring and targeted on-site reviews; and proportionate to the bank’s size, complexity, and systemic importance, according to the framework.

In order to support effective implementation of the RBS, BB has undertaken a comprehensive restructuring of its supervisory organogram. The objectives of this restructuring are to establish a clear single-point supervisory interface for each bank, eliminate duplication and fragmentation in supervisory data submission, and promote a more coordinated, risk-focused, and forward-looking supervisory approach.

Under the restructured framework, supervisory responsibilities have been realigned to ensure holistic bank-specific supervision through dedicated Bank Supervision Departments, while enabling specialised and cross-cutting oversight in critical areas such as supervisory policy coordination, data management and analytics, technology risk and digital banking supervision, money laundering and terrorist financing risks, and payment system oversight.

Accordingly, the BB has established a total of seventeen supervisory departments comprising twelve Bank Supervision Departments (BSD-1 to BSD-12) and five specialized supervisory departments.

As part of this transition, the existing inspection and function-based supervisory departments have been streamlined and integrated into the new RBS-aligned structure, to be effective from upcoming month, according to the framework.

Under the RBS framework, each BSD shall carry out full supervision of its designated banks through a single dedicated supervisory team for each bank. The team will conduct continuous supervision (off-site and on-site) and cover all key supervisory areas, including foreign exchange operations and complaint management, while maintaining the bank’s risk profile and ensuring timely supervisory intervention and follow-up.

Among the five specialized supervisory departments, the Supervisory Data Management and Analytics Department (SDAD) will serve as the central hub for supervisory data collection, validation, data quality assurance, and sectoral risk analysis to support timely, evidence-based supervision.

The Technology Risk and Digital Banking Supervision Department (TRDS) will oversee risks emerged from technology and digital banking under RBS. The Money Laundering and Terrorist Financing Prevention Department (AMLD) will carry dedicated supervisory responsibility for ML/TF risk while the Payment Systems Supervision Department (PSSD) will oversee the risk associated with payment and settlement systems of the banks.

Under the framework, each bank shall be assigned a Lead Bank Supervisor who shall serve the bank as the primary supervisory point of contact. The Lead Bank Supervisor shall coordinate supervisory activities relating to the bank, facilitate continuous supervisory dialogue and communicate Supervisory Letter as well as monitor and follow up on supervisory interventions.

For effective transition to RBS, BB has adopted a phased approach to supervisory data consolidation where all supervisory data shall be brought gradually under a single platform to avoid redundancy and duplication of data submission.