Bangladesh Bank Governor Dr. Atiur Rahman has attributed the resilience of the Bangladesh economy, against the onslaught of the recent global crisis, to the adoption of limited and regulated external exposure. “The limited, regulated external exposure served well in shielding our financial markets and institutions from the debacle caused by the contagious global crisis.
“The financial system in Bangladesh remains unscathed by the crisis, and well-poised to support the recovery of the real sector from weakening demand in the traditional Western export markets,” said Dr Rahman, while addressing a high-level meeting on better supervision of financial transactions, as well as better banking in a post-crisis era at Kuala Lumpur.
Economists and central bank governors from different countries attended the meeting, which was jointly organized by the Financial Stability Institute and Executives’ Meeting of East Asia-Pacific.
The Bangladesh Bank Governor said that Bangladesh is keeping track of developments in supervisory approaches and techniques stipulated by the Basel accords, apart from other regional groupings.
He said that being a developing market, in addition to a supervisory regime, with other more advanced peers ahead in the learning curve, enables the country’s banking sector to learn from implementation glitches and pitfalls faced elsewhere.
Banks in Bangladesh are now busy adjusting themselves properly to the Basel II capital regime (mandatory from 2010), and its attendant risk rating and risk management structures. Basel III capital requirement enhancements will be phased in duly. Regular stress testing has been introduced mandatorily to bring out vulnerabilities in banks.
Dr. Atiur said that they are looking forward to the revised global standards of fair value accounting, although tradable securities as yet do not comprise very significant parts of asset books in Bangladeshi banks.
“Our banking institutions are as yet nowhere near assuming global “too big to fail” or “too important to fail” stature; for branches of large global banks in Bangladesh, we expect cooperation and access to pertinent supervisory information from home country supervisors.”
Dr. Atiur observed that despite very elegant supervisory structures covering such aspects, “We hear about mature financial markets in advanced economies like USA and UK, failing to finance SMEs adequately or on affordable terms, while we do not hear about similar financing difficulty for activities of questionable merit like speculation and leveraged buyout of equity.”
He observed that although qualitative global best practice norms are working well in combating money laundering and terrorism financing, there appears to be no reason why this should not work in attaining better allocations for financing, eliminating pockets of exclusion of positive growth sources, and instead delineating new exclusion areas for questionable and potentially destabilizing activities.
The Bangladesh Bank Governor said that in Bangladesh qualitative promotion of financial inclusion, alongside discouragement of speculative, wasteful and nonessential use of credit resources have already been in service for quite a while already.
Dr Atiur Rahman is due to return home this evening from Malaysia.

News: The Independent /Bangladesh/19 Jan 2011