Strengthening supervisory capacity of BB suggested

Experts have suggested strengthening supervisory and monitoring capacity of the central bank to ensure financial stability, while pointing out that the quality of financial reporting should be improved to know the actual position of the business entities. The observations came at a seminar on 'Financial Stability and Risk Management in the Banking Sector', organised jointly by Bangladesh Economic Association and Dhaka School of Economics, at Bangabandhu Intentional Conference Centre in Dhaka Tuesday. "While risk management practices in the banking sector in Bangladesh have served the purpose fairly well in averting systemic crises, there is no room for complacence; such practices must be improved and developed continuously, in step with increasing depth, diversity and sophistication of our financial market and its services," Bangladesh Bank (BB) Governor Atiur Rahman said while speaking at the seminar. In particular, securitisation and derivatives trading that are that necessary for deepening of the secondary and tertiary markets, will help bring in new challenges in risk appraisal and management; practitioners in banks and supervisory staff in BB will have to acquire the needed knowledge base and expertise, he added. The central bank chief also said there have been sparse episodes of risk management weaknesses, leading to problems in a few individual banks needing to be sorted out through BB's intervention, but none of these posed a serious threat to instability by way of any contagion effect on other banks and financial institutions. "With limited, regulated external exposure that is keeping the system free of toxic assets, banks in Bangladesh remained healthy with comfortable liquidity and solvency even at the height of the global financial crisis," Dr. Rahman added. Former BB governor Salehuddin Ahmed said financial sector stability defines as effective and efficient intermediation of savings and investments by intermediaries without undertaking excessive risk. "The capacity of human resources along with information technology should be improved to manage risk properly," Dr. Ahmed said, adding that pro-cyclicality should be avoided to ensure stability of the financial sector. He had found 'unqualified audit reports' at times, while stating that the role of auditors is very important for improving the quality of financial reporting in the country.