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Bangladesh Bank

Recent Reform Initiatives

Bangladesh Bank
(Central Bank of Bangladesh)

Recent Reform Initiatives

Table of Contents
Foreword Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Chapter 10 Chapter 11 Annexure 1 Annexure 2 Currency management and payment systems Regulatory reforms Supervision of banks and financial institutions Financial inclusion Foreign exchange policy and reserve management Anti Money Laundering and Combating Financing of Terrorism Central Bank Strengthening Project Corporate Social Responsibility Green banking: Banking for environmental protection Digital Bangladesh Bank HR Development and capacity building Recent policy announcements by BB Glossary of terms and acronyms 4 7 11 14 17 21 24 27 30 32 35 39 41 57

Foreword
The role of financial sector regulators came under sharp scrutiny worldwide following the global financial crisis of 2008.The Bangladesh economy and its financial sector came out largely unscathed from the crisis, with timely and proactive policy responses. Bangladesh Bank (BB), the country’s monetary authority and financial sector regulator opted to proceed further forward, hastening ongoing reforms and taking up fresh ones, based on a new five year Strategic Plan for 2010-2014 drawn up in the November 2009 senior management executive retreat. Unorthodox policy approaches supportive of inclusive, environmentally sustainable growth gained new impetus, alongside core functions of surveillance and safeguarding of macroeconomic and financial stability. Major areas of reform include: Ensuring growth objectives supported by Bangladesh Bank’s focused credit policies are in sync with price stability and macroeconomic stability objectives. Insights and ideas are derived from rounds of stakeholder and expert consultations preceding drafting of the half yearly Monetary Policy Statements and its analytical base is being strengthened. Revamp of financial sector regulatory and supervisory frameworks with sharper risk and systemic stability focus in line with post-global crisis revisions of international best practice standards. Following implementation of Basel II capital regime, preparatory work is on for phasing in Basel III capital and liquidity standards. Corporate governance, risk management and disclosure practices in the financial sector are now under sharpened BB supervisory vigilance. Mandatory periodical stress testing brings out vulnerabilities of banks and financial institutions. BB’s regulatory and supervisory capabilities are being upgraded continually to meet the emerging new challenges. BB has been guiding banks and financial institutions into mainstreaming Corporate Social Responsibility (CSR) in their institutional goals and objectives in line with inclusive growth objectives of the national Perspective and Five Year Plan. This was followed up by engaging the entire financial sector in a sustained financial inclusion campaign to reach out to hitherto unserved and underserved population segments and economic sectors. The inclusion campaign is according priority attention to adequacy of credit flows to agriculture, SMEs, renewable energy generation and other environment friendly projects. While some extent of refinance support lines are available to lenders for occasional liquidity needs, participation of banks in the financial inclusion drives have by and large been spontaneous. Many of them have launched their own financing programs for farm and non-farm SMEs in specific activity clusters throughout the country like Agar and maize farming, light engineering workshops, handloom based textiles villages and so forth. State owned banks have by now opened about ten million new bank accounts in names of small landholder/landless farmers/other rural and urban people of small means with nominal Taka ten (about twelve cents) initial deposits; enabling them to receive government

agricultural input subsidies/social...
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