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Banking
in
Bangladesh
The
financial system of Bangladesh
consists of Bangladesh Bank (BB)
as the central bank, 4 State
Owned Commercial Banks (SCB),
5 government owned specialized
banks, 30 domestic private
banks, 9 foreign banks and 29
non-bank financial
institutions. Moreover, MRA
has given license to 298
Micro-credit Organizations.
The financial system also
embraces insurance companies,
stock exchanges and
co-operative banks.
CENTRAL BANK
Central
Bank and its policies
Bangladesh
Bank (BB), as the central
bank, has legal authority to
supervise and regulate all
banks and non-bank financial
institutions. It performs the
traditional central banking
roles of note issuance and of
being the banker to the
government and banks. Given
some broad policy goals and
objectives, it formulates and
implements monetary policy,
manages foreign exchange
reserves and lays down
prudential regulations and
conduct monitoring thereof as
they apply to the entire
banking system. Its prudential
regulations include, among
others: minimum capital
requirements, limits on loan
concentration and insider
borrowing and guidelines for
asset classification and
income recognition. The
Bangladesh Bank has the power
to impose penalties for
non-compliance and also to
intervene in the management of
a bank if serious problem
arise. It also has the
delegated authority of issuing
policy directives regarding
the foreign exchange regime.
Monetary
Policy
Monetary
policy is a set of rules that
aims at regulating the supply
of money in accordance with
predetermined goals or
objectives. Monetary policy
plays a very dominant role in
altering the economic activity
and the price level in a
country. So, it should be very
carefully formulated and
implemented in achieving the
goals and objectives as
outlined in the Bangladesh
Bank Order, 1972 below:
-
Price
stability both internal
& external
-
Sustainable
growth & development
-
High
employment
-
Economic
and efficient use of
resources
-
Stability
of financial & payment
system
Reserve
Management Strategy
Bangladesh
Bank (BB) is empowered by
section 7A of Bangladesh Bank
Order, 1972 (President’s
Order No. 127 of 1972) to hold
and manage the official
foreign exchange reserve of
Bangladesh
. It maintains its foreign
exchange reserve in different
currencies to minimize the
risk emerging from widespread
fluctuation in exchange rate
of major currencies and very
irregular movement in interest
rates in the global money
market. BB has established
Nostro account arrangements
with different Central Banks.
Funds accumulated in these
accounts are invested in
Treasury bills, repos and
other government papers in the
respective currencies. It also
makes investment in the form
of short term deposits with
different high rated and
reputed commercial banks and
purchase of high rated
sovereign/supranational/corporate
bonds. Forex Reserve &
Treasury Management Department
of BB performs the operational
functions regarding investment
which is guided by investment
policy set by the BB’s
Investment Committee headed by
a Deputy Governor. The
underlying principle of the
investment policy is to ensure
the optimum return on
investment with minimum market
risk.
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