Bangladesh Bank Governor Dr Ahsan H Mansur on Wednesday said the country has successfully overcome a difficult economic phase and is now moving steadily towards stability, supported by strong macroeconomic fundamentals and comprehensive reforms in the banking sector.

Speaking as the chief guest at a seminar titled “Banking Sector Reforms: Challenges and the Way Forward”, organised by Economic Reporters Forum (ERF), the Governor said the central bank’s key priorities include preserving public confidence in banks, restoring macroeconomic stability and addressing long-standing structural weaknesses in the financial sector.

He noted that although full confidence in the banking system has yet to be restored, it has largely been maintained despite prolonged stress.

“Preserving confidence itself is a major achievement during such a challenging period,” he said, adding that depositors have continued to demonstrate patience and cooperation.

Highlighting macroeconomic indicators, Dr Mansur said Bangladesh’s balance of payments position is now very strong, with the financial account recording a significant surplus and the overall external balance remaining firmly positive.

Foreign exchange reserves, he added, have already increased during the current year.

“There is absolutely no risk of economic collapse, even with the upcoming election,” the Governor said, noting that stability in the external sector has been restored faster than initially projected.

Measures expected to take two to three years have largely been achieved within the first year, he added.

On exchange rate management, Dr Mansur said there is no immediate cause for concern. Bangladesh Bank has purchased more than US$2.5 billion from the foreign exchange market through transparent, market-based mechanisms and will intervene only when necessary to ensure stability.

“Our policy is clear: reserves must be built from the strength of our own economy, not through external borrowing,” he said, adding that the central bank will continue to act responsibly in the foreign exchange market.

The Governor said Bangladesh Bank aims to raise foreign exchange reserves to around US$34–35 billion by the end of the year, regardless of IMF disbursements.

“IMF financing is not essential for balance of payments stability. Its real value lies in technical support,” he observed.

Turning to banking sector reforms, Dr Mansur identified weak governance in some institutions, capital shortfalls and a high volume of non-performing loans (NPLs) as the main challenges. He said the actual NPL ratio stands at about 36 percent, stressing that the central bank has chosen full transparency in disclosing data.

“We will not conceal data. Transparency is the first step towards recovery,” he said, acknowledging concerns over credit ratings but warning that hiding problems would only delay reforms.

As part of governance measures, the boards of 14 banks have been dissolved, and clear warnings issued that persistent governance failures will lead to intervention. Resolution, he added, is an essential component of effective oversight.

In some cases, however, Bangladesh Bank has refrained from intervening where banks have shown strong deposit mobilisation despite high loan losses, gradually easing restrictions based on performance.

Dr Mansur said five weak banks are being merged after completing all legal and regulatory procedures.

Under the expanded deposit insurance scheme, depositors will have immediate access to insured funds, while a new alternative account mechanism will allow partial but prompt access to deposits.

He said the merged institution will emerge as one of the strongest banks in the country, with robust capital, adequate liquidity and an extensive branch network.

“The government fully guarantees depositor protection. Losing confidence would harm everyone,” he added.

For non-bank financial institutions, the Governor said resolution will mainly involve liquidation rather than mergers, with depositor interests given top priority.

Sponsor shareholders responsible for mismanagement, he said, will not be protected.

He also said dividend and bonus payments have been restricted for banks that are unprofitable or face capital shortfalls.

Accountability will extend to boards and management, while large loans exceeding Tk 200 million will be subject to third-party collateral verification and forensic examination.

From January, risk-based supervision will be fully implemented across all banks, alongside the development of in-house forensic audit capacity at Bangladesh Bank to enable early detection of financial misconduct.

Looking ahead, Dr Mansur said comprehensive financial sector reform will take time but must continue without interruption. Key legal reforms, he noted, include strengthening bank resolution and deposit insurance frameworks, improving loan recovery and insolvency laws, and establishing an asset management company.

He also underscored the importance of strengthening the independence of Bangladesh Bank, saying legal protection from political pressure is essential for effective central banking.

Concluding his remarks, the Governor highlighted initiatives to expand financial inclusion and develop the bond market, stressing that reducing excessive corporate dependence on banks through greater use of bonds and capital market instruments is vital for long-term financial sector development.

“Challenges remain, but the direction is clear,” he said, expressing confidence that sustained reforms and accountability will lead to a resilient and stable banking system in Bangladesh.