ASIATODAY.ID, WASHINGTON — The World Bank has approved a $450 million financing package aimed at shoring up Bangladesh’s fragile banking system, as the South Asian nation struggles with soaring bad loans, weak governance, and mounting risks to economic growth.
The funding, approved by the World Bank’s Board of Executive Directors, comes at a critical moment for Bangladesh, whose banking sector has become a major vulnerability for an economy seeking to achieve trillion-dollar status in the coming decades.
Under the Financial Sector Support Project II, the World Bank will support reforms designed to strengthen deposit protection, enhance banking supervision, modernize regulatory systems, and lay the groundwork for restructuring troubled financial institutions, including state-owned banks.
The initiative seeks to restore confidence in a banking industry that accounts for nearly 90% of Bangladesh’s financial sector assets but is facing severe stress. According to official data, the country’s non-performing loan (NPL) ratio surged to 32.6% by the end of March 2026—more than four times the South Asian regional average of 7.9%.
At the same time, Bangladesh’s banking sector recorded a system-wide capital-to-risk-weighted assets ratio of negative 2.6% at the end of 2025, underscoring the depth of financial vulnerabilities confronting lenders.
“The vision of becoming a trillion-dollar economy requires a stable and inclusive financial sector,” said Jean Pesme, World Bank Division Director for Bangladesh and Bhutan on June 24, 2026.
He noted that persistent weaknesses, including poor corporate governance, regulatory capture, and related-party lending, have eroded the sector’s resilience and threatened its ability to support investment, economic expansion, and job creation.
The World Bank-backed program will increase capital in Bangladesh’s deposit protection fund to safeguard small depositors while strengthening the central bank’s supervisory capabilities. It also includes efforts to establish an emergency liquidity assistance framework, develop bank restructuring strategies, and advance reforms within state-owned financial institutions.
A significant portion of the project will focus on modernizing Bangladesh Bank’s information technology infrastructure to address growing cybersecurity threats and improve sector-wide data collection and analysis.
Officials say stronger digital systems will enable regulators to identify risks earlier, improve data-driven supervision, and enhance the overall resilience of the country’s financial sector.
The project forms part of a broader reform agenda supported by international development partners, including the International Monetary Fund (IMF) and the Asian Development Bank (ADB).
“The project supports measures to strengthen crisis preparedness and enhance the authorities’ capacity to manage stress in the banking sector,” said Toshiaki Ono, Senior Financial Sector Specialist at the World Bank and task team leader for the project.
The latest financing highlights increasing international concern over Bangladesh’s financial stability, with policymakers racing to contain systemic risks before they spill over into the broader economy.
Analysts say the success of the reform program could determine whether Bangladesh can restore investor confidence and sustain its long-term growth ambitions amid a rapidly changing global economic landscape. (AT Network)
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