Role of Bangladesh Bank to ensure sustainable financial development of Bangladesh
Sustainable development is a precondition for developing nation like Bangladesh whether that is in social, environment or financial and Bangladesh bank being one of the key policymakers and advisers of the government of Bangladesh has both moral and legal obligation to ensure sustainable development of Bangladesh. Thus Bangladesh Bank is contributing to such sustainable development of Bangladesh from the beginning of its birth through various means, methods and planning.
Before we proceed further, at first we need to know what sustainable development is. By definition, it means “Meet the necessity of the present without compromising the ability of the future generation to meet their own needs”
The world commission on environment and development, United Nation, 1987.
But what does it mean Sustainable development? In the simplest explanation, we should meet our present needs such as food, water, environment, economy, politics, society etc. in a way that does not affect the future generation negatively. For example, we should control our economy in some field though that brings high profit for the country on the other hand that destroys our environment and social structure thus that ultimately brings no added benefit in the regular life of people and that’s how that economic development is unsustainable. Now this definition is a wide one but includes economic development as one of the key pillars with two others, namely, Social and environmental.
If we inquest a little more picking the topic only on the economic sustainability is means, “the ability of an economy to support a defined level of economic production indefinitely”; This definition needs interpretation of its own but I would like to follow the simplistic approach once again. It stated that the economy must have the capacity to support its goal which is measured with planning so that that does not affect any other key element of development in a negative way, the target is not high profit that affect the system in the long run form any aspect but to maintain a healthy economic condition constantly.
Now Bangladesh Bank being the guardian of all the financial system of the country has its own responsibility under various laws of Bangladesh and as a policymaker of the field and as an adviser of government it has its moral liability as well.
Here I would like to mention some from both aspects.
Functions of Bangladesh Bank
In 1972’s Bangladesh Bank Order, section 7A has conferred some functions of Bangladesh Bank. They are as follows;
- Formulate and implement the monetary policy: By this provision, Bangladesh Bank helps the government in the planning and implementation stage about the monetary policy and thus helps the nation to establish sustainable development.
- Formulate and implement intervention policies in the foreign exchange market: that sub-section empowers the Bangladesh Bank (hereinafter mentioned as “The Bank”) to check and balance the foreign currency flow in local market and make the market stable for future.
- Give advice to the government: On the various subject matter, form the fact to the policy, form the local market to international dealing. This subsection is one of the most important ones that can be interpreted in many ways and a wide range of duties is given by this subsection. That also includes legislative measures to attain sustainable economic development and perform its planned functions.
- Hold and manage official foreign reserve in Bangladesh: Foreign reserve is a vital point for determining the currency rate, prevent unexpected inflation and hold economic and political power in the international arena. It definitely ensures the sustainability of the economy of Bangladesh.
- Promote, regulate and ensure a secure and efficient payment system: The Bank promotes various methods for the benefit and ease of the people that help the money to flow easily and thus positively affects the economy of the state. For example, Bangladesh is a glorious example in Mobile Banking as it is the most suitable alternative for any developing country. It also promotes e-payment, card (debit, credit) payment etc. The bank design and print new currency or replace useless currency through proper calculation on hundreds of variables like GDP, GNP, earning per capita etc. The bank design and print the banknote in a way that it cannot be forged. These measures are very much important for the economic sustainability of a country.
- Regulate and supervise banking companies and financial institutions: The Bank inspect and supervise banking companies and financial institutions regularly and ensure the system running properly.
In the same order there are more responsibilities that is given to the co-ordinate council under section 9A. As the council is formed under this order though other independent member is included, we may consider it as a part of Bangladesh Bank responsibility. Shortly the council shall include/ ensure/ responsible on following matters.
- Work on monetary and exchange rate, strategies and policies (2.a)
- Ensure consistency among macroeconomic targets of growth (2.b)
- To meet the purpose of a and b; before finalizing the budget to determine and analyzed credit requirements, monetary expansion, price inflation, net foreign assistance etc. (2.c)
- Meet quarterly basis, observe and decide reserve limit and latest development in the economy. (2.d)
- Consider the limit of government borrowing (2.e)
- Ensure Macro-economic framework (3)
Bangladesh Bank shall place before the council the following matter: (section .9 (4))
- (a) Relevant data relating to monetary expansion and Government borrowing from the banking system, and
- (b) The assessment of the Bangladesh Bank regarding the impact of economic policies of the government on monetary aggregates and balance of payments.
In the first portion of this section it articulated the formulation of co-ordination council, in the second step it mentioned the combined activates of the council and the third segment provided the responsibility only impose on Bangladesh Bank; by doing such it directly connected the bank with other responsible and policymaking authority to ensure the goal of the state, it provides each other with a clear view of total economic system of Bangladesh and by sharing information it made ease the suitable sustainable economic policy of Bangladesh.
Under section 42 to 48 Bangladesh Bank helps the all the banking companies and other financial institution to secure there invest by providing necessary information thus, maintain the stability of the national economy as the banking system is highly dependent on each other.
If we see the next principle act that has the massive impact on the financial industry and that is Banking Companies Act, 1991 we will find some nice provision that empowers Bangladesh Bank to supervise and direct the Banking Companies. Let’s see some key points that help ensure sustainable financial development of Bangladesh.
Controlling the power of Bangladesh Bank:
- Section 21 of the act prohibits floating charge on assets but Bangladesh bank can certify in written permitting floating charge and that power helps to stabilize the market like company (public) shares and stocks.
- Section 23 gives the power to Bangladesh Bank in special situation, especially appoint a general director.
- Section 24 and 25 Provides Bangladesh Bank to fix the Reserve limit of a Banking company.
- Section 27 Restricted on loans and advances but Bangladesh Bank has some power to approve loans and advances according to law.
- Section 29 Here Bangladesh Bank has given the power to control providing advances.
The section mentioned above provides special power to Bangladesh Bank and Bangladesh Bank can exercise them depending on the facts and circumstances on various emerging problems that are necessary to solve, thus Bangladesh Bank is taking responsibility to run the financial industry smoothly towards the goal of sustainable development.
Inspection and Directional Power of Bangladesh Bank:
- Inspection power of Bangladesh Bank (section 44): Bangladesh Bank may at any time being directed by the government or other office or by its own power can inspect any Banking Company or branch of any Banking company. Inspect its ledgers and accounts. Afterwards on the findings of the inspection may take any measures that are needed. May provide a guideline and suggestion, even if necessary, Bangladesh Bank can apply winding up of the Banking Company under section 66 of this act.
- Power of direction (section 45): Bangladesh Bank can direct any Bank regarding Public interest, interest of depositor, secure the proper management of banking company.
By executing this job Bangladesh Bank check any fraud or any other issues that are against the interest of sustainable development in the financial sector and provide proper direction to solve problem.
Power on Directors:
Power on director and Board of directors (section 46, 47): Bangladesh Bank can remove any board of directors or dismiss the Board of Directors of a Banking company according to the mentioned provisions.
Other powers of Bangladesh Bank
Other powers of Bangladesh Bank (Section 49): Bangladesh Bank may provide caution or prohibit entering into any particular transaction or class of transaction, order to do some action or order to refrain from taking some action in relation to Banking Business.
Directors of any Banking Company holds a very powerful position. To check that Bangladesh Bank has these power and by ensuring that Bangladesh Bank helps our economy run properly.
Suggestion and Recommendation on Acquisition, Suspension, Winding up (Section: 54, 59, 64, and 64): Bangladesh Bank may require to give suggestion and recommendation on the matter of Acquisition, Suspension, Winding up of a Baking companies act by Government or By Court. This suggestions and recommendations are the lifelines for the banking companies so Bangladesh Bank provides its opinion very carefully and save the bank or other banks and economic system by preventing that particular accused Bank to stop by acquisition, suspension or winding up.
Prevention of Money Laundering and Bangladesh Bank:
Bangladesh bank shall help to established Bangladesh Financial Intelligence Unite (BFIU) the BFIU will take advice and order form Bangladesh Bank. This Bangladesh Financial Intelligence Unite wing shall detect and take necessary steps to prevent money laundering. It may size any account on the transaction on any suspicious nature. – section 23 & 24 of The Money Laundering Prevention Act 2012.
This act prevents the unauthorized transaction and illegitimate income which is a slap over the corruption and corruption is clear negativity to the sustainable development both economically and socially thus by preventing smuggling of money the economy of the country became stronger and sustainable.
Powers of Bangladesh Bank under Anti-Terrorism Act, 2009
Bangladesh Bank may take necessary steps to prevent and identify any transaction carried out by any reporting agency with intent to commit an offence under this Act. On occasion of such transaction, Bangladesh Bank Can:
- (a) to call for a report relating to any suspicious transaction from any reporting agency, analyze or review the report keep record or database and if think necessary provide the information or report to the police or other respective law enforcement agencies for taking necessary actions;
- (b) if there are reasonable grounds to suspect that a transaction is connected to terrorist activities, to issue a written order to the respective reporting agency to suspend or freeze transactions of that relevant account for a period not exceeding 30 (thirty) days and, if it appears necessary to reveal correct information relating to transactions of the said account, such suspension or freezing order may be extended for an additional term not exceeding 6 (six) months by 30 (thirty) days at a time;
- (c) To monitor and supervise the activities of reporting agency;
- (d) To give directions to the reporting agencies to take preventive steps to prevent financing of terrorist activities and proliferation of weapons of mass destructions (WMD);
- (e) To monitor the compliance of reporting agencies and to carry out on-site inspection of the reporting agencies for fulfilling any purpose of this Act; and
- (f) To provide training to officers and employees of the reporting agencies for the purpose of identification of suspicious transactions and prevention of financing of terrorist activities.
(2) Bangladesh Bank, on the identification of a reporting agency or its customer as being involved in a suspicious transaction connected to the financing of terrorist activities, shall inform the same to the police or appropriate law enforcement agency and provide all necessary cooperation to facilitate their inquiries and investigations into the matter.
(3) If the offence is committed in another country or trial of an offence is pending in another country, Bangladesh Bank shall take steps to seize the accounts of any person or entity upon request of the foreign state or pursuant to any international, regional or bilateral agreement, United Nations conventions ratified by the Government of Bangladesh or respective resolutions of the United Nations Security Council.
(4) The fund seized under sub-section (3) shall be subject to disposal by the concerned court or in pursuant to the concerned agreements, conventions or resolutions adopted by the United Nations Security Council.
(5) The power and responsibilities of Bangladesh Bank under the provision of this Act shall be exercised by the Bangladesh Financial Intelligence Unit (BFIU) and all the governmental, semi-governmental, autonomous bodies or any other relevant institutions or organizations shall provide information requested under this Act or, as the case may be, spontaneously provide information to the Bangladesh Financial Intelligence Unit.
(6) Bangladesh Financial Intelligence Unit shall, on request or, as the cases may be, spontaneously provide information relating to terrorist activities or financing of terrorist activities to financial intelligence units of other countries or any other similar foreign counterparts.
(7) For the purpose of investigation relating to financing of terrorist activities, the law enforcement agencies shall have the right to access any document or file of any bank under the following conditions:
(a) With an order from a competent court or special tribunal; or
(b) With the approval of the Bangladesh Bank.
(8) If any reporting agency fails to comply with the directions issued by Bangladesh Bank under this section or knowingly provides any wrong or false information or statement, the said reporting agency shall be liable to pay a fine determined and directed by Bangladesh Bank not exceeding taka 25 (twenty-five) lac and Bangladesh Bank may suspend the registration or license with intent to stop operation of the said agency or any of its branches, service centers, booths or agents within Bangladesh or, as the case may be, shall inform the registering or licensing authority about the subject matter to take appropriate action against the agency.
(9) If any reporting agency fails to pay or does not pay any fine imposed by Bangladesh Bank
according to sub-section (8) of this Act, Bangladesh Bank may recover the amount from the reporting agency by debiting its accounts maintained in any bank or financial institution or Bangladesh Bank and in case of any unrealized or unpaid amount, Bangladesh Bank may, if necessary, apply before the concerned court for recovery.
This act provides a wide area to detect transactions and prevent from any emerging threat. Under this act by eliminating the challenges of unlawful transaction, Bangladesh Bank is helping the country for sustainable development both from the economic and social aspect.
As a law student observing various power under various laws of Bangladesh, I think Bangladesh Bank has enough power to ensure sustainable financial development of Bangladesh but in some case Bangladesh bank may help the government to be more concerned about new e-commerce field or in the situation like money flow from Middle Eastern countries for non-productive NGO sector etc. So far Bangladesh Bank is one of the best autonomous bodies with some limitation regarding direct action is playing a very good role to ensure the sustainable financial development of Bangladesh.