B Mirror Report : According to the International Chamber of Commerce Bangladesh (ICCB), one of the most important structural issues affecting Bangladesh’s banking system is the consistently high level of non-performing loans (NPLs).

In an editorial published in its October–December 2025 Quarterly News Bulletin, the Chamber warned that NPLs now exceeding Tk 6.44 trillion and accounting for about 35.7 per cent of total outstanding loans pose a significant threat to banks, depositors and overall macroeconomic stability.

The editorial noted that Bangladesh’s banking system remains central to the country’s economic progress, playing a vital role in mobilising savings, directing investment, financing trade, supporting entrepreneurship and generating employment.

As Bangladesh advances toward upper-middle-income status, the ICC Bangladesh stressed that the robustness, credibility and resilience of the banking sector and the effectiveness of Bangladesh Bank as the regulator will be decisive in sustaining growth and enabling the economy to absorb future shocks.

Describing the scale of NPLs as alarming by international standards, the Chamber cautioned that excessive bad loans erode bank balance sheets, create capital shortages, constrain lending capacity, raise borrowing costs and deter new investment. Over time, such pressures can heighten risks for depositors and weaken confidence in the financial system, the editorial said.

At the same time, the ICC Bangladesh acknowledged recent regulatory measures that have compelled banks to more accurately identify and report defaulted loans. While these steps have exposed long-standing vulnerabilities, the Chamber emphasised that restoring the long-term health of the banking sector requires firm financial discipline, effective risk management and strong governance.

The editorial also underscored the need to clearly distinguish between wilful defaulters and businesses facing genuine financial distress, allowing viable enterprises to receive structured support while ensuring deliberate misconduct is addressed decisively and transparently.

Drawing from international experience, the ICC Bangladesh highlighted the importance of strong, professional and independent central banks in preserving financial stability. It noted that Bangladesh Bank’s responsibilities extend beyond monetary policy to include prudential regulation, crisis management, oversight of payment systems and maintaining confidence in the financial sector.

According to the editorial, when a central bank operates independently, fairly and professionally, the economy is better positioned to manage financial stress, maintain stability and attract both domestic and foreign investment.

The bulletin reviewed Bangladesh Bank’s actions over the past two years, pointing out that extraordinary measures such as liquidity support, guarantees and refinancing facilities were implemented to protect depositors and maintain stability during periods of financial strain. However, it cautioned that such emergency interventions cannot replace strong governance, prudent lending practices and effective supervision.

One of the major recent developments highlighted in the editorial is the Bank Resolution Ordinance 2025, which introduced a formal framework for addressing distressed financial institutions. Under this framework, five Shariah-based banks were merged into a single state-owned entity to protect depositors and limit systemic risk, marking the largest intervention of its kind in Bangladesh’s financial history.

The Chamber noted, however, that experts have raised concerns over the requirement for shareholder approval in mergers involving publicly listed companies under the Companies Act. While consolidation can help reduce contagion risk and facilitate restructuring, the ICC Bangladesh stressed that long-term success will depend on accountability, improved governance, modern risk-management practices and strong regulatory oversight.

The editorial concluded that Bangladesh is at a critical turning point. To support export diversification, CMSME expansion, technological innovation, climate-resilient investment and infrastructure development, the country needs a strong and autonomous central bank, strict action against wilful defaulters, enhanced bank governance and transparency, globally aligned risk and compliance standards, responsible lending practices and continuous strengthening of regulatory capacity.

“Building a financial system that gains trust both domestically and internationally and enables sustained economic development is the goal in addition to preventing a crisis,” the editorial said.

According to Ataur Rahman, Secretary General of ICC Bangladesh, ICCB reiterated its dedication to collaborating closely with regulators, legislators, banks, and the larger business sector to guarantee the stability, credibility, and worldwide respect of the nation’s financial system.