Overview of Financial System in Bangladesh

The Financial System in Bangladesh

A financial system is a system that to channels funds from lenders to borrowers, to create liquidity and money, to provide a payments mechanism, to provide financial services such as insurance and pensions and to offers portfolio adjustment facilities. A developed financial system is one that has a secure and efficient payment system, security market and financial intermediaries that arrange financing and derivative markets and financial institutions that provide access to risk management instruments.

The present structure of the financial system in Bangladesh comprises of various types of banks, insurance companies, and non-bank financial institutions. Bangladesh Bank is at the top of the banking system and is accountable for assuring prudential administration and central banking activities for all types of banks operating within the banking industry. On the other hand, the Securities and Exchange Commission (SEC) of Bangladesh is the regulatory body for stock-market related activities.

In Bangladesh there are three categories of financial institutions that are currently in operation. They are as follows:-

Categories | | No of institutions in each category |

Depository | • Commercial Banks

NationalizedPrivateForeign

• Credit Unions• Micro Finance Institutions | 4309 |

Contractual | • Life Insurance Companies

• General Insurance Companies

• Pension Funds | 62 |

Investment Intermediary | • Finance Companies•Merchant Banks•Security firms

• Mutual Funds | 91 |

Banking Financial Institutions

Scheduled Banks: These are banks which get license to function under Bank Company Act, 1991 (Amended in 2003).

There are 47 scheduled banks in Bangladesh who operate under full control and regulation of Bangladesh Bank which is authorized to do so through Bangladesh Bank Order, 1972 and Bank Company Act, 1991.

The banking sector of Bangladesh comprises four categories of scheduled banks. These are state-owned...