WB approves $450m to support Bangladesh's banking sector

The World Bank Board of Executive Directors has approved $450 million in financing to help Bangladesh strengthen the foundations of a stronger banking sector, a prerequisite for reviving the country's economic growth and job creation.

The financing, under the Financial Sector Support Project II, aims to strengthen the deposit protection system to safeguard small depositors and build Bangladesh Bank's supervisory capacity and systems, according to a World Bank press release issued today (24 June).

The project will also lay the groundwork for bank resolution and reforms in state-owned banks.

It will support the deposit protection fund by increasing its capital and advancing key reform priorities, including enhancing the deposit protection system, establishing an effective Emergency Liquidity Assistance framework, developing bank restructuring strategies and supporting reforms in state-owned banks.

Bangladesh's banking sector faces significant challenges caused by weak corporate governance, regulatory capture and related-party lending.

The non-performing loan (NPL) ratio stood at 32.6% as of the end of March 2026, well above the 7.9% average for South Asian banks, while the system-wide capital-to-risk-weighted assets ratio was negative 2.6% as of the end of December 2025.

"Bangladesh's vision of attaining a trillion-dollar economy requires a stable and inclusive financial sector. But the banking sector—which accounts for about 90% of total financial sector assets—faces mounting stress," said Jean Pesme, World Bank Division Director for Bangladesh and Bhutan.

"This project will help Bangladesh put in place a set of essential tools, systems, and safeguards needed to protect small depositors and support confidence, restore stability in the banking sector, and allow it to support economic growth and job creation," he said.

The project will upgrade and modernise Bangladesh Bank's Information and Communications Technology (ICT) infrastructure, helping address rising cybersecurity risks and close critical gaps in sector-wide data and analytics.

This will improve the central bank's ability to monitor risks, enhance data-driven and risk-based supervision, and strengthen the resilience of the financial sector.

"The project, which forms part of a coordinated approach by development partners including the IMF and the Asian Development Bank, supports measures to bolster crisis preparedness and build the authorities' capacity to manage banking sector stress," said Toshiaki Ono, World Bank Senior Financial Sector Specialist and Task Team Leader of the project.