Be tough on those who looted banks

The Bangladesh Association of Banks (BAB) yesterday demanded decisive action from the government against owners and groups who looted money from banks, warning that the overall financial cushion against bad loans has declined to an alarming level.

The financial buffer against bad loans, termed the Capital to Risk-Weighted Assets Ratio or Capital Adequacy Ratio in the banking sector, has declined to nearly 3 percent, said the association of sponsors of private banks.

The drop in the capital adequacy ratio has created significant stress across the sector and is limiting banks’ ability to support industrial growth, SME financing, employment generation, and investment expansion, it said in a statement.

The BAB delegation, led by its Chairman Abdul Hai Sarker, placed the observations during a meeting with Finance Minister Amir Khosru Mahmud Chowdhury to discuss key fiscal, regulatory, and structural measures required ahead of the upcoming national budget for the fiscal year 2026-27.

The association highlighted the severe challenges currently facing the banking industry, including rising non-performing loans (NPLs), pressure on capital adequacy, weak private sector credit growth, and the erosion of public confidence caused by governance failures, prolonged legal recovery processes, and economic uncertainty.

“A meaningful re-capitalisation of the banking sector requires robust recovery processes and strong action against those who continue to hold shares and assets within the financial system despite looting money,” said the statement.

The BAB urged swift legal recovery, the confiscation of illicitly acquired assets, and enhanced enforcement measures to restore confidence and protect depositors’ interests.

It cited the amendment in the banking resolution law and warned that any perception of allowing controversial former sponsors or major defaulters to return to the banking system could affect depositor confidence, investor sentiment, and the credibility of reforms.

To facilitate quicker management of distressed assets, the BAB recommended stronger coordination between Bangladesh Bank and the Bangladesh Securities and Exchange Commission (BSEC), alongside the establishment of fast-track financial courts and a centralised Asset Management Company (AMC).