The Importance of Transparency and Accountability in Government Operations and Financial Markets

Transparency and accountability are two essential components that play a crucial role in ensuring macro-economic fiscal sustainability, good governance, and overall fiscal discipline. In this article, we will explore the importance of transparency and accountability in government operations and financial markets, using examples from Bangladesh to illustrate their significance.

The Consequences of Lack of Transparency and Accountability

In Bangladesh, the lack of transparency and accountability has led to several high-profile scandals, including the Hallmark scandal involving state-owned Sonali Bank. The scandal involved borrowers and officials colluding in a non-transparent manner, resulting in the siphoning off of huge amounts of public money. This case highlights the need for both transparency and accountability in government operations.

The Role of Accountants

Accountants play a vital role in providing useful financial information to market participants. However, they should not rely solely on numbers but engage their own logic and judgment to analyze a set of numbers. By doing so, accountants can help identify potential issues and provide valuable insights that can inform business decisions.

Good Governance in the Financial Sector

Good governance is essential in the financial sector, particularly in the banking sector. Bangladesh Bank has taken several steps to strengthen the legal framework of the financial sector, bring dynamism, extend autonomy to the central bank, combat money laundering offenses, and stop financing for terrorism.

Key Challenges Facing the Banking Sector

The banking sector in Bangladesh faces several key challenges, including:

• Ensuring good corporate governance
• Expanding potential markets
• Broadening ownership
• Creating alternative financing options
• Accelerating growth
• Increasing employment
• Helping reduce poverty

Proposed Solutions

To address these challenges, three major steps are proposed:

1. A Strong and Independent Central Bank: The central bank should focus on core banking issues, ensuring that it has the necessary independence to make decisions without external pressure.
2. Prudential and Management Norms: A well-thought-out set of prudential and management norms should be established by the central bank, which are not subject to frequent changes due to external political/administrative pressure.
3. Prompt Corrective Actions: A system of prompt corrective actions should be implemented for the management of crises and legal/administrative actions against persons responsible for crises in a particular bank or in the banking ‘system’ as a whole.

Conclusion

In conclusion, transparency and accountability are essential components that play a crucial role in ensuring macro-economic fiscal sustainability, good governance, and overall fiscal discipline. The examples from Bangladesh highlight the need for both transparency and accountability in government operations and financial markets. By implementing good governance practices, including a strong and independent central bank, prudential and management norms, and prompt corrective actions, we can ensure that depositors, borrowers, and investors are protected, and that the banking system is stable and effective.