The stability and integrity of a nation’s banking system are fundamental pillars of economic prosperity and public confidence. To ensure these systems function effectively, insulated from short-term pressures and vested interests, a comprehensive and principled reform agenda is essential. The following framework outlines a series of interlinked measures designed to reform the banking sector through institutional independence, enhanced governance, and unwavering accountability.
Upholding central bank autonomy. The cornerstone of financial stability is a central bank empowered to operate independently. This requires a legal mandate that shields monetary policy, regulatory oversight, and supervisory actions from political influence, ensuring decisions are guided solely by economic fundamentals and long-term stability goals.
Depoliticising bank governance. The integrity of financial institutions begins with their leadership. Governance must be reformed to mandate transparent, merit-based appointments for bank boards and senior management. Selection criteria should prioritize professional expertise and independence, decisively ending and avoiding the practices based on political affiliation.
Fortifying risk and regulatory frameworks. A proactive and robust supervisory architecture is non-negotiable. This entails the full adoption of Risk-Based Supervision (RBS) to allocate resources efficiently, alongside the rigorous enforcement of the Expected Credit Loss (ECL) model for forward-looking loan loss provisioning. Furthermore, integrating mandatory forensic audits and strengthening internal controls are critical steps to detect and prevent malfeasance.
Championing radical transparency. Transparency serves as a powerful deterrent to malpractice. Mandating the real-time public disclosure of significant loan approvals, beneficial ownership information, and non-performing loan data empowers media, civil society, and the public to act as vigilant stakeholders, fostering a culture of accountability.
Ensuring stringent legal accountability. The rule of law must be reinforced with clear, stringent penalties for financial misconduct. Legislation should target wilful defaulters, fraudulent activities, and any undue external pressure on banking decisions, establishing a credible and formidable deterrent.
Accelerating digital transformation. Technological adoption is key to reducing discretionary risks and enhancing inclusion. Accelerating the implementation of automated, data-driven credit assessment and digital platforms minimises opportunities for graft while boosting efficiency. Initiatives like “nano-lending” can strategically extend services to the unbanked population.
Cultivating an ethical institutional culture. Integrity must be ingrained at every level. This requires mandatory, ongoing training in ethics, compliance, and risk management for banking personnel, coupled with strong, enforceable whistleblower protection policies to safely surface internal concerns.
Managing a stable and decisive transition. Reform must be implemented with resolve yet careful sequencing to maintain market stability. Ensuring continuity through secured tenures for key independent leadership and establishing merit-based, transparent processes for selecting board chairpersons are vital. Crucially, banking strategy must be insulated from transient political cycles to build durable investor confidence.
Attracting top-tier independent directors. To secure the highest calibre of independent oversight, compensation for independent directors must be competitive and market-based, reflecting the significant responsibility and expertise the role demands.
Fostering inclusive stakeholder collaboration. Sustainable reform requires actively engaging civil society, private sector leaders, and international financial institutions. These ensures that policies are not only technically sound but also socially grounded, widely accepted, and enduring.
This holistic approach is not merely a regulatory checklist but a necessary covenant for rebuilding trust. By committing to these principles, stakeholders can collectively forge a banking sector that is resilient, transparent, and fundamentally aligned with the nation’s long-term economic health.
The imperative for collective action: The path outlined herein is neither a theoretical exercise nor a mere aspiration; it is an urgent operational necessity. A banking sector weakened by political interference, weak governance, and a deficit of accountability cannot serve as the reliable engine of growth and capital allocation that a modern economy requires. The consequences—eroded public trust, stifled investment, and systemic vulnerability—are already apparent and demand a decisive response.
Implementing this blueprint requires more than legislation; it demands a profound shift in mindset and a covenant of shared responsibility. The government must demonstrate the political will to enact and, crucially, to uphold the laws that guarantee independence. Regulators must be empowered and resourced to act without fear or favour. Bank leadership must embrace a culture where professional integrity outweighs personal or political allegiance. Civil society, the media, and the international community must maintain vigilant oversight, holding all actors to the promised standards.
The journey will be complex and will encounter resistance from entrenched interests. A phased, yet unwavering, implementation is key. Begin by cementing central bank autonomy and depoliticizing appointments—the foundational steps without which other measures will falter. Concurrently, the strengthening of legal frameworks and the rollout of transparency platforms can build public momentum and create facts on the ground.
A financial system that commands domestic and international confidence, channels savings productively to fuel sustainable enterprises, extends opportunity through genuine financial inclusion, and acts as a stabilising force during economic uncertainty. It is the bedrock upon which long-term prosperity is built.
Ultimately, the reform of the banking sector is a test of institutional maturity. It is a choice between short-term expediency and long-term strength, between opacity and trust, between vulnerability and resilience. The blueprint is clear. The need is urgent. The responsibility for action rests with all who have a stake in the nation’s future. The time to begin is now.
Dr Md. Touhidul Alam Khan is the Managing Director & CEO of NRBC Bank PLC and a fellow cost & management accountant from ICMAB.
touhid1969@gmail.com
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