Corporate Governance in the Banking Sector of Bangladesh

Abstract

Like other developing economies, the banking sector becomes the dominant financial intermediary in the financial system of Bangladesh due to underdeveloped capital markets, limited availability of financial instruments and lack of confidence on financial system. Given the bank’s intermediary role in providing stability to the financial system, Bangladesh as well as many emerging economies has implemented policies to develop and restructure the banking sector. An important feature of these policies was to design guidelines for ‘best practices’ known as, ‘corporate governance of banks’. The unique feature of banking industry which deals with the money of the depositors conveys the inevitability to implement corporate governance in this sector. This paper in early part deals with the concept and evolution of corporate governance in this sector and argued the importance of a broader view of corporate governance, which encapsulates both shareholders and depositors. The penultimate section examines the corporate governance of banks in Bangladesh in the context of ongoing banking reforms. The final section provides a set of measures for both micro and macro level to strengthen corporate governance in this sector.

Keywords: Corporate Governance, Bangladesh, Banking Sector