The recent liquidity crisis that has plunged the nine prominent banks in Bangladesh is a cause for serious concern.
This newspaper on Tuesday reported that with a collective shortfall exceeding Tk 18,000 crore, this situation highlights deeper structural weaknesses within the banking sector that demand immediate and sustained attention.
The report said this crisis, exacerbated by financial mismanagement and a shaky economic environment, has not only rattled the banking sector but also raised alarm about the overall health of the nation’s economy.
These banks, once considered stable, are now lining up at the doors of the Bangladesh Bank (BB) for liquidity support, seeking guarantees amounting to over Tk 25,000 crore from the interbank money market.
The central bank’s cautious stance, issuing guarantees on a case-by-case basis rather than approving blanket bailouts, demonstrates prudence.
However, it also signals that the underlying problems will not be resolved through quick fixes or short-term financial aid.
One of the more troubling aspects of this crisis is that it persists despite significant management changes at these institutions.
Following the collapse of kleptomaniac Hasina’s regime on August 5, the boards of several banks were reconstituted under new leadership.
However, the crisis shows leadership changes alone cannot rectify years of mismanagement, poor oversight, and a lack of accountability.
While Bangladesh Bank’s hesitance to approve the full amounts requested by some troubling banks is a sign of responsible governance, there remains a pressing question: will the crisis spiral out of control if these institutions cannot stabilize soon?
BB’s decision to sign deals with five struggling banks is a welcome step. The support from the interbank money market should offer a temporary lifeline, but it is far from a permanent solution.
The real challenge lies in addressing the root causes of this crisis: poor lending practices, weak regulatory oversight, and a banking culture that often allows bad loans to proliferate unchecked.
Above all, the political sycophancy that enabled these banks to operate unchecked must not be overlooked when assessing the root causes of today’s financial troubles.
The crisis has already eroded public trust in the banking system, which is essential for banking sector stability and investor confidence.
Only through collective efforts and a commitment to responsible banking practices can the sector recover and regain its footing in the long run.