Visible reforms key to restoring confidence in banking sector: Mansur

Former Bangladesh Bank governor Ahsan H Mansur has said visible implementation of banking sector reforms is essential to restore public confidence and discipline in the country's financial system.

Reacting to the proposed FY2026-27 budget, Mansur said restoring confidence in the banking sector and ensuring discipline should remain among the government's key medium-term priorities to support economic recovery and sustain investment.

He said reforms initiated during the interim government need to be carried forward by the new administration.

"We had proposed amendments to the Bank Companies Act to limit excessive family control in banks. If those amendments are implemented, we will understand that the government is genuinely serious about reducing concentrated control. We would like to see those reforms materialise" he said.

Mansur also stressed the importance of ensuring the independence of Bangladesh Bank to reduce external interference in the banking sector.

"From the very beginning, we have emphasised the need to ensure the independence of the central bank. In this regard, a draft proposal was submitted to parliament to strengthen the autonomy of Bangladesh Bank," he said.

The former governor added that the current economic adviser Rashed Al Mahmud Titumir had contributed significantly to refining that draft when he was associated with Bangladesh Bank's board.

"We submitted the revised draft to the government, and it remains under consideration. If that proposal is implemented, Bangladesh Bank will become truly independent, and only then can interference be reduced. Interference will not disappear automatically," Mansur said.

Noting that the government had previously indicated plans to abolish the Financial Institutions Division (FID), Mansur said, "The finance minister himself had indicated this intention. However, the FID continues to operate with full authority. If the government is committed to reducing interference, it should move forward with that reform."

Referring to recent developments at Islami Bank Bangladesh PLC, the former governor expressed concern over what he described as signs of political interference.

"The appointment of a new chairman and the resignation of the managing director raise concerns about external influence in the bank's affairs. This type of intervention creates instability in the banking sector, and we are extremely worried about its implications," he said.

"In my view, this is an unnecessary self-inflicted problem," Mansur added.

According to him, Islami Bank had been performing well, with its liquidity position and deposit growth compared to many other banks.

"It had already repaid the Tk15,000 crore liquidity support provided by Bangladesh Bank and had regained a stronger financial position," he added.

Noting that the developments could trigger deposit withdrawals, he said, "If this situation is politically driven, it is a matter of concern."

"For such a large institution, there is no justification for unnecessary political involvement," he added.

Mansur said the current uncertainty in the banking sector was largely "self-inflicted" and cautioned that failure to implement reforms could worsen the situation.

"If visible reforms are implemented, confidence will return and discipline will be restored. Otherwise, the situation may deteriorate further, which would be highly damaging for the country and for the banking sector," he said.

He also called for the appointment of a neutral and professional board at Islami Bank, arguing that competent professionals should be allowed to manage the institution objectively and in the interests of depositors.

"This is not a matter of personal disputes or political rivalry. It is a matter of national interest," Mansur said, adding that all political disagreements could be resolved through dialogue and consensus.

The former governor said, "The government should act in the interests of banks, depositors, the economy and the people of the country. That is what we expect from the new administration."