Why banks need a chief economist

Bangladeshi banks used to manage deposits, loans and risk in a stable, regulated environment. Now, with global trade slowing due to geopolitical conflicts and Bangladesh set to lose its LDC trade benefits, the industry faces a dramatic change. Banks are now exposed to volatile currencies, high inflation and political unrest. These challenges demand urgent solutions. Old risk strategies no longer work. Bangladeshi private banks must understand macroeconomic shifts; ignoring them is risky. Appointing Chief Economists helps bridge risk gaps and address new challenges.
Bangladesh's economy is under pressure. Growth has dropped from above 6.0 per cent to around 4.0 per cent. Inflation is nearly 10 per cent. Real incomes have fallen, making loan repayments more difficult. Foreign reserves have declined sharply over the past two years. These trends directly affect banks, highlighting the urgent need for macroeconomic expertise.
When inflation rises, borrowers struggle to repay loans. A weakening currency makes imports more expensive. Slower growth reduces loan demand, while defaults increase. Official non-performing loan rates exceed 9.0 per cent, but the real figure may be higher. The sector is already under strain. This is not just a lending issue; failing to anticipate economic risks creates deeper problems. Each private bank in Bangladesh should appoint a qualified chief economist for stronger risk management and strategy.
Major global banks such as JPMorgan Chase, Goldman Sachs and HSBC rely on economic experts to guide strategy. Their economists do not merely write reports; they shape lending, manage risk, set pricing and steer banks through uncertainty.
Despite these global examples, Bangladeshi private banks rarely appoint chief economists, leaving them exposed as challenges intensify. This gap is risky. Risk teams that focus only on individual borrowers often ignore broader economic threats. Banks tend to expand lending after a crisis begins, when it is already too late. A Chief Economist can provide forward-looking insights, helping banks identify trends, reduce losses, discover opportunities and adapt more quickly.
A chief economist tracks inflation, interest rates, commodity prices and demand patterns. These insights help banks determine which sectors are likely to grow or struggle and assess how local risks respond to policy changes or global events. Without such analytical capacity, Bangladesh's banking sector risks falling behind. Banks must adapt to avoid rising losses and systemic vulnerability.
Shafiq R Bhuiyan
shafiqrbhuiyan@gmail.com