Financial Crime World

Banking Regulatory Framework in Bangladesh

Overview

The banking regulatory framework in Bangladesh is a complex system that regulates various aspects of the banking industry. This overview provides an insight into key aspects such as deposit insurance, risk-based premium rates, and the role of the Insurance Development and Regulatory Authority (IDRA).

Deposit Insurance System

Bangladesh Bank (BB) has implemented a deposit insurance system to protect depositors in case of bank failure. The Deposit Insurance Trust Fund (DITF) offers limited protection up to Taka 0.01 million for minor depositors.

  • Deposit Insurance Coverage: DITF provides coverage for deposits up to Taka 0.01 million.
  • Eligibility Criteria: Minor depositors are eligible for insurance coverage.
  • Funding Mechanism: The DITF is funded by a portion of the banks’ profits and contributions from banks.

Risk-Based Premium Rates

Bangladesh Bank has introduced risk-based premium rates for scheduled banks. Problem banks contribute 0.09 percent, while private banks excluding problem banks and state-owned commercial banks contribute 0.07 percent.

  • Risk Assessment: Banks are assessed based on their creditworthiness and financial stability.
  • Premium Rates: Premium rates vary based on the bank’s risk profile.
  • Funding Mechanism: The premium revenue is used to fund deposit insurance payouts.

Insurance Development and Regulatory Authority (IDRA)

IDRA is the regulator of the insurance industry in Bangladesh, established under the Insurance Development and Regulatory Act of 2010. Its objectives include fostering an efficient corporate environment, safeguarding society’s aspirations, and promoting robust economic growth.

  • Regulatory Oversight: IDRA regulates all insurance companies operating in Bangladesh.
  • Licensing Requirements: IDRA issues licenses to insurance companies and monitors their compliance with regulatory requirements.
  • Investigation and Enforcement: IDRA investigates complaints against insurance companies and takes enforcement action as necessary.

Central Bank Strengthening Project

Mr. Rahman was involved in the central bank strengthening project from 2004 to 2006, collaborating with lawyers from Fox Mandal, India, and Gide Loyrette Nouel, France. The project covered various regulatory domains, including banking, money laundering, credit information, supervision, foreign exchange, and Islamic banking.

  • Project Objectives: The project aimed to strengthen the central bank’s regulatory framework and improve its ability to supervise banks.
  • Collaboration: Mr. Rahman worked with international lawyers to achieve project objectives.
  • Key Domains: The project covered a range of regulatory domains, including banking and Islamic banking.

Banking Regulatory Landscape in Bangladesh

The central bank plays a crucial role in banking regulation in Bangladesh, with the Banking Regulation and Policy Department (BRPD) and Department of Banking Inspection (DBI) wielding significant influence over critical banking operations.

  • Regulatory Oversight: The central bank regulates all banks operating in Bangladesh.
  • Supervisory Functions: The BRPD and DBI supervise banks to ensure compliance with regulatory requirements.
  • Enforcement Action: The central bank takes enforcement action against non-compliant banks.

Challenges and Key Issues in Banking Regulatory Litigation

Banking regulatory litigation poses several challenges, including:

Power Limitations

Authorities exercising power beyond statutory limits pose a challenge in banking regulatory litigation.

  • Statutory Limits: Regulators must operate within their statutory authority.
  • Excessive Power: Exercising power beyond statutory limits can lead to legal challenges.
  • Consequences: Failure to comply with statutory limits can result in enforcement action against regulators.

Fundamental Rights Implications

Conflicting regulations that impinge upon fundamental rights require careful analysis and strategic legal arguments.

  • Fundamental Rights: Regulators must balance regulatory requirements with the protection of fundamental rights.
  • Conflict Resolution: Conflicts between regulatory requirements and fundamental rights require careful analysis and resolution.
  • Strategic Legal Arguments: Regulators must present strong, strategic legal arguments to defend their actions.