BB governor appointment: How aligned with expectations

The decision to appoint a cost accountant holding an FCMA (Fellow of the Chartered Institute of Management Accountants) degree in cost management and a businessman as governor of Bangladesh Bank has naturally sparked widespread discussion. The question of whether the government is truly giving the highest priority to reforming the banking sector is now being raised not only within policymaking circles but also among common people.

The central bank is not merely an institution that formulates monetary policy; it is the chief regulator and supervisory authority of the country’s financial system and the ultimate guarantor of financial stability. Who leads such an institution, what his professional background is, and how independently he will be able to perform his duties are therefore important questions, especially at a time when the banking sector faces multiple challenges.

Appointing someone with a business background to this position has understandably raised concerns about potential conflicts of interest. Business experience can indeed help in understanding the real economy. However, it must also be remembered that the role of a central bank governor is not to represent corporate interests but, when necessary, to take firm and even unpopular decisions against those interests.

Responsibilities such as controlling inflation, safeguarding the credibility of monetary policy, and taking effective action against weak or irregular banks require a clear personal and institutional distance. How firmly this delicate but important boundary can be maintained is now the central concern.

Bangladesh’s banking sector is already facing a multidimensional crisis. A persistently high rate of non-performing loans, misuse of loan rescheduling, political influence on boards of directors, and the limited effectiveness of regulatory bodies have placed considerable strain on the financial system.

Also, there have been questions about the financial health of many banks, affecting depositors’ confidence. In this context, the central bank required leadership capable of clearly advancing a reform agenda and willing to take necessary tough decisions. Whether the new appointment of the Bangladesh Bank governor will meet that expectation remains to be seen.

Outgoing governor Ahsan H Mansur attempted to introduce several significant reform initiatives in the banking sector. Not everyone agreed with all of his measures, which is natural. However, it is difficult to deny that he strongly highlighted the need for structural changes regarding non-performing loans and governance.

Many believe that he did not receive sufficient policy and political support from the interim government. As a result, in some cases he had to take decisions on his own initiative, which created controversy and drew reactions from different quarters. Nevertheless, his tenure can be characterised by an attempt to take an active stance on reform. The sudden halt of that process or a shift in direction through a change in leadership naturally leaves room for questions. Such a departure was by no means desirable.

In a broader context, however, the issue is more complex. Reforming Bangladesh’s banking sector has long been identified as an urgent priority. International organisations, economists, and policymakers have repeatedly pointed out structural weaknesses in the sector. Yet implementing reform has not been easy in practice.

Allegations have it that an informal anti-reform alliance comprising political elites, influential business groups, and a section of the administration has remained active for years. Measures such as strict management of non-performing loans, ensuring accountability of boards of directors, and strengthening the independence of regulatory bodies have therefore often faced obstacles. The question of reform is thus not merely economic; it is deeply intertwined with the realities of political economy.

High expectations had been created from the outset that the new government would depart from past practices and take a firm stance in implementing effective and sustainable banking sector reforms. In particular, commitments to establish good governance in the financial sector, ensure the genuine independence of the central bank, and strengthen accountability structures generated hope among many. However, questions have already begun to arise over how aligned the new governor’s appointment is with those expectations.

Many see this appointment as the first major test of the government’s commitment. The central question now is how independently the new leadership will be able to operate and how firmly it will pursue necessary reform measures. Confidence cannot be built through policy statements or goodwill messages alone; only concrete actions and difficult decisions will demonstrate whether the banking sector is truly moving towards reform or once again yielding to the politics of compromise.

* Selim Raihan is professor, department of economics, University of Dhaka, and executive director of SANEM.