ADB reaffirms support for Bangladesh’s banking sector reforms, financial stability

A delegation from the Asian Development Bank (ADB), led by Vice President for South, Central and West Asia Yingming Yang, met Bangladesh Bank (BB) Governor Md Mostaqur Rahman at the central bank’s headquarters in Dhaka on Thursday.

The meeting focused on strengthening Bangladesh’s banking sector and making it safer and more stable.

The two sides discussed reforms to weak banks, bank restructuring, recapitalisation, financial stability and ways ADB can support Bangladesh in carrying out these reforms.

BB Deputy Governors Md Habibur Rahman and Dr Md Kabir Ahmed, along with senior officials from the Financial Sector Support and Strategic Planning Department and other relevant departments, also attended the meeting.

Governor Mostaqur Rahman said the central bank is firmly committed to carrying out the necessary reforms in the banking and wider financial sectors.

ADB Vice President Yingming Yang welcomed the central bank’s reform plans. He said ADB is interested in continuing to support Bangladesh during the reform process.

Both sides agreed to strengthen cooperation to build a stronger, more stable and sustainable financial sector.

The meeting comes at a difficult time for Bangladesh’s banks. Bangladesh Bank’s Financial Stability Report shows that total distressed loans�"including defaulted, rescheduled and written-off loans�"reached Tk 10.87 lakh crore at the end of 2025. This was equal to about 59 per cent of all outstanding bank loans.

The banking sector is also facing a serious shortage of capital. The overall capital-to-risk-weighted assets ratio fell to negative 2.64 per cent at the end of 2025, showing how badly the financial condition of many banks has weakened.

Bangladesh Bank has therefore made reducing bad loans one of its main priorities. It has announced an 18-month plan that includes faster loan recovery, legal reforms and the creation of asset management companies to take troubled loans off banks’ balance sheets.

The central bank is also moving towards the Expected Credit Loss system under IFRS 9, which is expected to be fully implemented in 2027. The system is designed to make banks recognise possible loan losses earlier instead of waiting until loans become seriously problematic.

The government has also identified recapitalisation of troubled banks as a major priority for the 2026-27 fiscal year.
Around Tk 40,000 crore has already been allocated for recapitalising distressed banks, while a risk-based system for supervising weak banks is also planned.

This is important because several banks do not have enough capital to absorb their losses and continue normal lending.
ADB has been supporting Bangladesh’s banking-sector reform programme for some time. In June 2025, the development lender approved a $500 million policy-based loan aimed at improving bank supervision, corporate governance, asset quality and financial stability.