Wednesday, 15 January, 2025
The Bangladesh Bank has become a hollow institution, undermined by corruption, nepotism, and excessive government intervention. A stark example of this is the case of Ziaul Hasan Siddiqui, a former Deputy Governor of Bangladesh Bank (BB).
After retiring, he was appointed Chairman of Sonali Bank, Bangladesh's largest state-run bank, continuing his influential role in the banking sector. His career spanned several government terms, with no accountability for his actions, even during the 2016 Bangladesh Bank cyber heist that saw $101 million stolen.
Siddiqui's case is not isolated. Many former senior officials at the central bank have moved into commercial banking roles post-retirement, often after helping secure the interests of politically connected businesses. Meanwhile, competent bankers are losing their positions due to internal power struggles and declining profits.
The February 2016 cyber heist remains a grim reminder of the central bank's vulnerabilities. Cybercriminals exploited outdated security systems to steal funds, some of which were later recovered. Investigations revealed a lack of preparedness among bank personnel and poor cybersecurity infrastructure.
The delayed response and opacity surrounding the incident raised questions about the central bank’s effectiveness, and its inability to protect the country’s financial system tarnished Bangladesh’s international standing.
The ongoing issue of political interference in the banking sector has exacerbated systemic flaws. Both the central bank and commercial bank officials alleged that corruption, weak oversight, and political patronage were rampant during the Awami League era, leaving Bangladesh Bank a mere "paper tiger."
It is estimated that around $17 billion was siphoned off in the 15 years leading up to the collapse of Sheikh Hasina's government in August. Former chief economist Mustafa K. Mujeri confirmed that much of the looting occurred with the political backing of the past government.
Under political influence, commercial banks have been looted through fraudulent loans and irregularities. The boards of these banks, along with Bangladesh Bank, have facilitated this corruption.
The Bangladesh Bank’s role in money laundering has been a significant concern. Billions of dollars were illicitly transferred abroad due to weak regulatory oversight, exacerbated by political interference and the bank’s complicity. Despite international warnings, the bank failed to enforce anti-money laundering (AML) regulations, allowing illicit financial flows to persist.
The government also heavily intervened in the banking sector, using state-owned banks to channel funds to politically connected businesses. This resulted in a surge in non-performing loans (NPLs), crippling the economy and undermining the central bank’s credibility.
Some bankers said that the AL government manipulated exchange rates and foreign reserves to meet political objectives, further destabilizing the financial system.
The cumulative effect of these practices was a dramatic erosion of public trust. Rising inflation, a depreciating currency, and dwindling economic opportunities for citizens became a stark reality. Businesses, too, struggled in an unstable financial environment, further stifling growth and investment.
The international community also took note, with Bangladesh facing inclusion on watchlists for money laundering and terrorism financing. This only underscored the urgent need for comprehensive reforms to restore credibility and trust in the country’s financial system.
To address these systemic issues, banking experts say Bangladesh Bank must be reformed. Legislative reforms are crucial to safeguard the bank's independence and shield it from political interference. Appointments to key positions should be based on merit rather than political ties. Strengthening the bank’s oversight mechanisms and cybersecurity infrastructure is also critical to prevent future cyberattacks and ensure accountability.
In addition, the central bank must prioritise transparency and public accountability, including regular audits and public disclosures. By engaging with stakeholders and demonstrating a commitment to integrity, Bangladesh Bank can rebuild public trust.
Reforming the Bangladesh Bank is essential for the future of the country’s economy. The lessons from past failures must drive the changes needed to ensure that the central bank can serve as a pillar of financial stability and integrity.
With the right reforms, Bangladesh can lay the foundation for sustainable economic growth and regain its standing in the global financial community. The time to act is now.
Comments
The Bangladesh Bank has become a hollow institution, undermined by corruption, nepotism, and excessive government intervention. A stark example of this is the case of Ziaul Hasan Siddiqui, a former Deputy Governor of Bangladesh Bank (BB).
After retiring, he was appointed Chairman of Sonali Bank, Bangladesh's largest state-run bank, continuing his influential role in the banking sector. His career spanned several government terms, with no accountability for his actions, even during the 2016 Bangladesh Bank cyber heist that saw $101 million stolen.
Siddiqui's case is not isolated. Many former senior officials at the central bank have moved into commercial banking roles post-retirement, often after helping secure the interests of politically connected businesses. Meanwhile, competent bankers are losing their positions due to internal power struggles and declining profits.
The February 2016 cyber heist remains a grim reminder of the central bank's vulnerabilities. Cybercriminals exploited outdated security systems to steal funds, some of which were later recovered. Investigations revealed a lack of preparedness among bank personnel and poor cybersecurity infrastructure.
The delayed response and opacity surrounding the incident raised questions about the central bank’s effectiveness, and its inability to protect the country’s financial system tarnished Bangladesh’s international standing.
The ongoing issue of political interference in the banking sector has exacerbated systemic flaws. Both the central bank and commercial bank officials alleged that corruption, weak oversight, and political patronage were rampant during the Awami League era, leaving Bangladesh Bank a mere "paper tiger."
It is estimated that around $17 billion was siphoned off in the 15 years leading up to the collapse of Sheikh Hasina's government in August. Former chief economist Mustafa K. Mujeri confirmed that much of the looting occurred with the political backing of the past government.
Under political influence, commercial banks have been looted through fraudulent loans and irregularities. The boards of these banks, along with Bangladesh Bank, have facilitated this corruption.
The Bangladesh Bank’s role in money laundering has been a significant concern. Billions of dollars were illicitly transferred abroad due to weak regulatory oversight, exacerbated by political interference and the bank’s complicity. Despite international warnings, the bank failed to enforce anti-money laundering (AML) regulations, allowing illicit financial flows to persist.
The government also heavily intervened in the banking sector, using state-owned banks to channel funds to politically connected businesses. This resulted in a surge in non-performing loans (NPLs), crippling the economy and undermining the central bank’s credibility.
Some bankers said that the AL government manipulated exchange rates and foreign reserves to meet political objectives, further destabilizing the financial system.
The cumulative effect of these practices was a dramatic erosion of public trust. Rising inflation, a depreciating currency, and dwindling economic opportunities for citizens became a stark reality. Businesses, too, struggled in an unstable financial environment, further stifling growth and investment.
The international community also took note, with Bangladesh facing inclusion on watchlists for money laundering and terrorism financing. This only underscored the urgent need for comprehensive reforms to restore credibility and trust in the country’s financial system.
To address these systemic issues, banking experts say Bangladesh Bank must be reformed. Legislative reforms are crucial to safeguard the bank's independence and shield it from political interference. Appointments to key positions should be based on merit rather than political ties. Strengthening the bank’s oversight mechanisms and cybersecurity infrastructure is also critical to prevent future cyberattacks and ensure accountability.
In addition, the central bank must prioritise transparency and public accountability, including regular audits and public disclosures. By engaging with stakeholders and demonstrating a commitment to integrity, Bangladesh Bank can rebuild public trust.
Reforming the Bangladesh Bank is essential for the future of the country’s economy. The lessons from past failures must drive the changes needed to ensure that the central bank can serve as a pillar of financial stability and integrity.
With the right reforms, Bangladesh can lay the foundation for sustainable economic growth and regain its standing in the global financial community. The time to act is now.
Comments
