Banks losing funds due to weak governance

Weak governance and poor institutional performance have eroded public trust in banks, pushing many depositors towards informal channels, Monetary Policy Committee (MPC) members said at a recent event.

Stronger measures are needed to rebuild confidence and encourage people to return their savings to the formal banking system, they said at the 12th Monetary Policy Committee (MPC) meeting, held at the Bangladesh Bank headquarters in Dhaka on June 21, according to the meeting minutes.

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Chaired by BB Governor Md Mostaqur Rahman, the committee comprised central bank officials and prominent economists.

The committee observed that systemic governance deficits and institutional underperformance had eroded public trust in the banking sector, prompting a shift of funds from formal banks to informal channels.

It said restoring depositor confidence and ensuring robust depositor privacy were imperative to encourage the return of deposits to the formal financial system.

Bangladesh’s economy remains in a fragile and uneven recovery phase.

The committee observed that the central bank’s prolonged contractionary monetary policy had helped moderate inflationary pressures.