Banking vulnerabilities persist: BB report

Concerns over liquidity shortages, weak asset quality, and capital adequacy persisted in the banking sector during FY2024-25, highlighting structural vulnerabilities in the country’s financial system, Bangladesh Bank said in its annual report.

The central bank’s latest assessment showed that several indicators of banks’ financial health remained under pressure during the fiscal year amid a challenging macroeconomic environment.

According to the report, asset-quality concerns continued to weigh on the sector as banks struggled to maintain adequate provisioning and capital positions.

It said some banks failed to meet the required capital adequacy ratios, while provisioning shortfalls also persisted during the year.

Liquidity management remained another major concern for the banking sector as tighter monetary conditions and elevated interest rates affected overall financial stability.

The central bank maintained a tight monetary policy stance during FY2024-25 to contain inflationary pressures and stabilise the foreign-exchange market, the report noted.

It also underscored the importance of strengthening governance, supervision, and risk-management practices in the banking industry to improve overall financial stability.

Despite the prevailing challenges, the banking sector continued to support economic activities, according to the central bank.

The report added that ongoing reform initiatives aimed at improving the monetary policy framework and strengthening financial-sector governance would help enhance stability in the medium term.