Corporate Hegemony in the Banking Sector and the Deposit Crisis in Bangladesh

• Bangladesh’s banking sector is facing a severe crisis driven by record-high non-performing loans (NPLs) and widespread corporate control.
• Classified or defaulted loans reached approximately 36% of total credit as of June 2026, one of the highest ratios globally.
• The sector’s overall Capital Adequacy Ratio (CAR) has fallen into negative territory, leaving banks unable to absorb further losses.

Structural Conflicts: Ownership vs. Governance

• Most leading private commercial banks are controlled by industrial conglomerates (garment, energy, real estate), creating a conflict of interest.
• Conglomerate-led boards frequently engage in "related-party lending," funneling public deposits into their own affiliated enterprises.
• Regulatory audits have specifically highlighted massive, abnormal loan exposures linked to single business groups, such as those at Islami Bank Bangladesh.

Regulatory Laxity and Global Precedents

• Sector governance has eroded over time, accelerated by the licensing of nine new banks in 2013 and 2017 amendments to the Bank Company Act that increased family board representation.
• Global models for separation include:
  • United States: Post-1930s Great Depression barriers between commercial banking and industrial ownership.
  • India: 1969 nationalization of major banks to prevent credit diversion to private industrial houses.

Proposed Path to Recovery

• Enforce strict caps on family and corporate group representation on bank boards.
• Empower independent, professional directors free from political influence.
• Implement structured mergers or resolutions for insolvent institutions.
• Exercise strong regulatory oversight to eliminate related-party lending practices.