TDS Desk:

The banking sector is still grappling with old irregularities amid weak oversight despite repeated promises of recovery by the interim government over the last 14 months.

Analysts and stakeholders say political dynasties continue to treat banks as prsonal fiefdoms, and conglomerates still dominate the boards.

Moreover, a culture of impunity, coupled with a regulator that is too weak to enforce discipline, has left the sector in disarray, weighed down by mounting default loans, they say.

The six-member taskforce led by Bangladesh Bank Governor Ahsan H Mansur – formed last September to overhaul governance and publish a white paper on the sector – has gone silent, holding just one meeting in the last six months and producing no report.

“Politics, business interests and regulatory failure have created a toxic mix in the financial sector. It is disheartening that banks are still serving vested groups instead of the economy,” said economist Mustafa K Mujeri.

Due to these regulatory failures, banks are exploiting the lack of oversight to flout rules and operate unchecked.

Recently, Union Bank has disregarded an order from the central bank by appointing First Security Islami Bank’s Senior Executive Vice President Mizanur Rahman as deputy managing director and continues to retain him in the role.

Likewise, at Madhumati Bank, rules meant for accountability became shields for family control. Relatives of ousted prime minister Sheikh Hasina – including her cousin Sheikh Salahuddin Jewel and nephew Sheikh Fazle Noor Taposh – retained board seats despite repeated absences.

At AB Bank, founding chairman M Morshed Khan, connected by marriage to tycoon and Awami League powerbroker Salman F Rahman, saw his son Faisal Morshed Khan quietly regain control after the mass uprising. This occurred despite their history of fleeing corruption charges.

Collectively, these cases highlight how defiance and impunity are deeply entrenched in the system.

According to the Bangladesh Bank, as of mid-2025, nearly 30% of loans across the banking sector are non-performing, with some banks reporting a shocking 99.5%. More than Tk2.2 lakh crore was siphoned abroad over the last fifteen years – much of it disguised as trade finance.

Analysts say while these are legacies of past regimes, the present failure lies in enforcement – the Bangladesh Bank has yet to prove it can break the cycle of capture.

“If you make a list of what the Bangladesh Bank should have done over the past year but didn’t, it would be endless,” Zahid Hussain, former lead economist of World Bank’s Dhaka office, told journalists. “But whatever steps have been taken must now be completed without delay.”

Former deputy governor Muhammad A Rumi Ali said, “The regulator itself still carries the trauma of 15 years of misgovernance. That may explain why it struggles to take a firm stand in some cases.”

However, former governor Mohammed Farashuddin blamed the interim government’s weakness for the central bank’s frailty. He told “Only an elected political government can play a strong role.”

UNION BANK DEFIES CENTRAL BANK’S DIRECTIVE

On 8 July this year, Union Bank – already with 98% of its loans in default – approved the appointment of First Security Islami Bank SEVP Mizanur Rahman as deputy managing director with a Tk2.55 lakh monthly package.

The Bangladesh Bank, stunned by the move, ordered the contract cancelled by 22 September. But as of 5 October, Rahman was still in office, the board openly ignoring the directive.

MADHUMATI BANK: LOOPHOLES FOR THE POWERFUL

By law, directors lose their posts after three months of absence. But the Madhumati board stretched “leaves of absence” indefinitely, with the Bangladesh Bank’s approval. At the 14 July AGM, Taposh and Jewel were reappointed, and Taposh’s brother-in-law, Humayun Kabir, was elected chairman.

According to sources, Managing Director Md Shafiul Azam urged the directors to resign, but they refused.

“Rules meant for accountability became shields for family control,” said one central bank official on condition of anonymity.

AB BANK BLEEDING UNDER DYNASTIES

Losses of Tk1,900 crore in 2024 alone and non-performing loans nearly 84% pushed AB Bank to the brink. Instead of reform, the bank returned to dynastic control.

“AB Bank is being bled dry by families treating it as their inheritance. Yet the Bangladesh Bank has not enforced a decisive shake-up,” said one former independent director.

CENTRAL BANK’S WRONG CALLS AND WEAK RULES

The rot has been enabled not just by rogue boards but also by the central bank’s wrong calls and weak rules.

At Islami Bank, regulators appointed Obayed Ullah Al Masud as chairman despite internal findings that he had extended illegal favours in past posts. He retained S Alam loyalist Mohammad Monirul Mawla as managing director until Mawla was arrested for corruption. Masud himself resigned under a cloud of shady dealings.

At IFIC Bank, the Bangladesh Bank placed Md Mehmood Husain as chairman in September 2024. Soon after, he billed the bank for luxury foreign trips and launched a vanity campaign plastering his image across branches. Instead of enforcing discipline, regulators have effectively condoned misconduct.

Premier Bank is another case. For more than a year after the fall of the Awami League government, its board – dominated by former AL lawmaker HBM Iqbal and his family – clung to power despite allegations of looting. The central bank dissolved it only this August, long after the damage was done.

Although the central bank has taken some steps, critics say interventions have come too late and too softly to restore confidence.

“Each bad appointment, each delayed action, and each loophole has allowed corruption – and reform to slip further out of reach,” said former Dhaka University Professor Mahbub Ullah.

Bangladesh Bank spokesperson Arief Hossain Khan said, “We had to build new boards from within the sector, which created problems. But when errors surfaced, we took corrective action.”

REFORM TASKFORCE FALLS SILENT

To drive banking sector reforms, the Bangladesh Bank formed a six-member taskforce on 11 September last year under the leadership of governor Ahsan H Mansur. In its press release, the central bank said the taskforce would publish a white paper on the sector.

But more than a year later, no such white paper has been initiated, and in the past six months the taskforce has held only one meeting.

According to central bank sources, Lutfe Siddique, the chief adviser’s special envoy for international affairs and a member of the taskforce, has not attended a single meeting.

One member of the taskforce told “With the creation of the Bank Resolution Department, the taskforce no longer has a role.”

The Bank Resolution Department was established on 22 July this year.