1) The document discusses banking supervision in Bangladesh, noting its importance for financial stability both domestically and internationally. It outlines objectives to identify key factors for effective supervision and recommend areas for improvement. 2) Data on non-performing loans, capital adequacy ratios, and other indicators are presented for different bank types from 2010-2013. A force field analysis identifies driving and restraining forces for banking sector stability. 3) Recommendations are made to strengthen the legal framework for supervision, improve the supervisory framework regarding risk management and governance, and develop robust knowledge management and human resources at the central bank. Limitations of time and data constraints are also noted.

1. Md. Nazrul Islam
Joint Director,
Banking Regulations and Policy Department
Bangladesh Bank
November 25,
2015
Banking Fair Bangladesh-2015

2. Background, Objectives
Importance of Supervision
Indicators of Supervision
Findings
Limitations and Path forward
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3.  Global Perspective:
 Banking Supervision : key areas of attraction
 To strengthen the global financial system-BIS
 Weaknesses threaten financial stability both
within that country and internationally.
 Bangladesh Perspective:
 Overall Supervision Concern
 Fiscal cost for banks
3

4.  To identify the key factors (external &
internal) for effective banking supervision
under the BCPs and other local scenarios.
 To recommend the areas of improvement for
the betterment of the systemic functionality.
4

5. Supervision and Banking
Sector’s Performance
Supervision and Effective Monetary
Policy
Supervision and Macro-economic
Stability
Supervision and Economic growth
5

6. NPL+Writeoff
Total
Default GrossNPLtoTotalLoans
Gross
NPL
CapitalToRWA
CAR
& Recent
Banking
Scam
6

7. Year SCBs DFIs PCBs FCBs Total
2010 15.66 24.15 3.15 2.99 7.27
2011 11.27 24.55 2.95 2.96 6.12
2012 23.87 26.77 4.58 3.53 10.03
End of
june,2013 26.4 26.2 6.6 4.7 11.9
December
2013 19.8 26.8 4.5 5.5 8.9
March 2014 22.0 30.9 5.8 5.3 10.5
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Source: Published data

8. Types of Banks 2009 2010 2011 2012 2013(June)
SCBs 9.02 8.92 11.68 8.13 1.2
DFIs .36 -7.25 -4.49 -7.78 -9.0
PCBs 12.12 10.08 11.49 11.38 11.4
FCBs
28.13 15.63 20.97 20.56 20.3
Total 11.67 9.31 11.35 10.46 9.1
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Source: Bangladesh
Bank

9. 9

10. 10
Banking
Sector &
Financial
Sector
Stability
Modified from Lewin’s Force Field

11. Restraining forces
Driving forces
Status quo
Desired
state
Time
Force-field Model of Change
Banking Sector & Financial Sector
Stability
Modified from Lewin’s Force Field11

12. 12
Force Field Analysis
Score Driving Forces Restraining Forces Score
3 Amended Legal Frameworks Supervision Friendly Legal
Framework
5
4 Organizational Motivation Socio-Political Environment 4
3 Skilled work force Supervisory Framework 5
3 International Best Practice Internal Governance Framework
and Market Discipline
4
3 Standard Management
Informational System
Capital Adequacy and Managing
Material Risk
4
4 Forward Looking Leadership Other Factors (Fragmented
Supervisory Points ,
Organizational supervisory
structure and Knowledge
management etc. )
5
20 27
1 (very weak influence), 5 (very strong influence)

13.  External
 Legal framework
 Socio-Political Environment
 Internal
 Supervision Framework: KM , Priority of risk ,
Principles
 Governance Framework: BB should monitor
internal Governance of Banks
 Capital Adequacy and Managing Material risk:
 Supervisory College, Develop Robust KM System
and Human resources (numbers, expertise and
authority)
 Supervision friendly Organizational Structure
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14.  Limitations
 Time Constraints
 Real data to measure Government Intervention
 Comprehensive rigorous study- laws regulations,
policies
 Path forward
 Supervision-top priority and built communication
strategy with Monetary Policy
 Factors should be identified with comprehensive
study in future for BB’s main objectives
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15. Thank you
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