THE BANGLADESH

Details & Description

Establishment

Bangladesh Bank, the central bank and apex regulatory body for the country's monetary and financial system, was established in Dhaka as a body corporate vide the Bangladesh Bank Order, 1972 (P.O. No. 127 of 1972) with effect from 16th December, 1971. At present it has ten offices located at Motijheel, Sadarghat, Chittagong, Khulna, Bogra, Rajshahi, Sylhet, Barisal, Rangpur and Mymensingh in Bangladesh; total manpower stood at 5807 (officials 3981, subordinate staff 1826) as on March 31, 2015.

VISION

To develop continually as a forwardlooking central bank with competent and committed professionals of high ethical standards, conducting monetary management and financial sector supervision to maintain price stability and financial system robustness, supporting rapid broad based inclusive economic growth, employment generation and poverty eradication in Bangladesh

MISSION

We are discharging these functions in a forward looking, proactive, responsive and consultative manner. In our aspiration for ever higher standards of performance we are aware of our limitations in independence, logistics, professional know-how and appropriateness of skill sets in staffing; we are persistent in effort to overcome these limitations. In our work we shall preserve and further strengthen the already earned confidence and trust of the nation, to continue being seen as a respected institution to be emulated. Towards achieving these, our performance commitments to our diverse broad stakeholder groups are as follows:

For the Nation

We shall catalyze and support socially responsible and environmentally sustainable development initiatives, inter alia including fuller financial inclusion of under-served productive sectors and bringing in needed new dimensions in financial markets and institutions; to facilitate broad based growth in output, employment and income, for rapid poverty eradication and inclusive economic and social progress.

For the government

We shall adopt and implement monetary and credit policies conforming with national priorities, in coordination with government's fiscal and other macroeconomic objectives. We shall optimize foreign exchange reserves and returns thereon,maintain stability in financial markets curbing excessive volatility, and provide analysis and advice to the government on issues in economic management and development.

For depositors in banks and financial institutions, investors in financial assets

We shall ensure safety of deposits in licensed banks and financial institutions with on-site and off-site supervision of their activities and with adequate financial information disclosure requirements, besides insuring small deposits. We shall maintain an interest rate structure that provides fair return on financial assets while also supporting growth in the real sector, and we shall promote and support development of markets in bonds and securities.

For banks and financial institutions in Bangladesh

We shall provide precise prudential regulatory, risk management and disclosure framework to protect solvency and liquidity of individual institutions and stability of the overall financial system, acting as lender of last resort if and when needed. We shall issue regulations and enforce compliance therewith inter alia on capital adequacy, asset classification, income recognition and provisioning, large exposure and risk management; through open consultative processes. We shall maintain external sector viability with exchange rate stability and adequate foreign exchange reserves. We shall provide a secure and quick payment settlement system. We shall promote and support development of new financial products, services and instruments.

For banks abroad

We shall maintain a solvent, liquid domestic financial system with precise prudential regulatory, risk management and disclosure framework in line with global best practice standards. We shall maintain external sector viability with exchange rate stability and adequate reserves. We shall maintain a secure, quick payment system for settlement of claims.

For the business community, including farm and non-farm SMEs

We shall maintain liquidity conditions and credit policies ensuring adequate credit flows at market driven flexible interest rates for all productive economic activities, including in sectors like agriculture and SMEs where markets have not been very responsive. We shall foster macroeconomic stability through monetary and external sector management. We shall promote and support development of new financial products, services and instruments. We shall maintain a secure and quick payment system for settlement of claims.

For Bangladeshis abroad

We shall facilitate remittances from your earnings abroad to Bangladesh through legitimate banking channels free of involvement of money launderers or terrorism financiers. We shall support and promote development of new investment opportunities for your remittances to Bangladesh.

For our employees

We shall maintain an environment that reinforces our pride in being employees of Bangladesh Bank with compensation structure adequate to attract and retain the best in the market, job assignments and logistically well resourced work situations encouraging continuous learning and rewarding innovativeness and performance excellence by fast tracking in career path, clear delegation and delineation of responsibilities and accountabilities, fairness and objectivity in performance appraisal and personnel placement decisions.

BANK AND CENTRAL BANKING: A BRIEF CONCEPT

Concept in Brief

A central bank, reserve bank, or monetary authority is a banking institution granted the exclusive privilege to lend a government its currency. Like a normal commercial bank, a central bank charges interest on the loans made to borrowers, primarily the government of whichever country the bank exists for, and to other commercial banks, typically as a 'lender of last resort'. However, a central bank is distinguished from a normal commercial bank because it has the monopoly on creating the currency of a nation, which is loaned to the government in the form of legal tender. It is a bank that can lend money to other banks in times of need. Its primary function is to provide the nation's Money Supply, but more active duties include controlling subsidized-LoanInterest Rates, and acting as a lender of last resort to the Banking Sector during times of financial crisis (private banks often being integral to the national financial system). It may also have supervisory powers, to ensure that banks and other financial institutions do not behave recklessly or fraudulently.

History

Strengthening the financial sector is a vital concern for an economy. Efficient banking or sound financial system serves as an effective channel for mobilizing funds from savers to productive sectors and thus helps to achieve economic growth. However, the idea of ‘Bank’ is so ancient and this concept is evolving over time. Around the time of Adam Smith (1776) there was a massive growth in the banking industry. Within the new system of ownership and investment, the state's role as an economic actor changed substantially. The Jews in Jerusalem introduced a kind of banking in the form of money lending before the birth of Christ. The word 'Bank' was probably derived from the word 'bench' as during ancient time Jews used to do money lending business sitting on long benches. First modern banking was introduced in 1668 in Stockholm as 'Svingss Pis Bank' which opened up a new era of banking activities throughout the European Mainland.

In the South Asian region a major landmark was the establishment of the Hindustan Bank in 1700 at Kolcutta. Dhaka Bank started to operate in1806. Banks established in this region during the British period include Kurigram Bank (1887), Kumarkhali Bank(1896), Mahalaxmi Bank, Chittagong bank(1910), Dinajpur Bank(1914), Comilla Banking Corporation (1914) and Comilla Union Bank(1922). Major Indian Banks also had branches in this territory. In Europe prior to the 17th century most money was Commodity Money, typically Gold or silver. However, promises to pay were widely circulated and accepted as value at least five hundred years earlier in both Europe and Asia. The medieval European Knights Templar ran probably the best known early prototype of a central banking system. At about the same time, Kublai Khan of the Mongols introduced Fiat Currency to China, which was imposed by force by the confiscation of Specie. Although central banks are generally associated with fiat money, under the international Gold Standard of the nineteenth and early twentieth century’s central banks developed in most of Europe and in Japan, though elsewhere Free Banking or Currency Boards were more usual at this time. Problems with collapses of banks during downturns, however, was leading to wider support for central banks in the respective nations which did not as yet possess them, most notably in Australia.

As the first public bank to "offer accounts not directly convertible to coin", the Bank of Amsterdam established in 1609 is considered to be the "first true central bank". This was followed in 1694 by the Bank of England, created by Scottish businessman William Paterson in the City of London at the request of the English government to help pay for a war.

With the collapse of the gold standard after World War II, central banks became much more widespread. The banking system at our independence consisted of two branch offices of the former State Bank of Pakistan established in July 1948: one was in Bangladesh (former East Pakistan) and the other was in West Pakistan (present Pakistan).

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