Bangladesh’s banking sector is experiencing a growing “flight to safety” as depositors reassess risk amid concerns around liquidity, asset quality and governance in parts of the system.
The shift reflects a deeper change in how banking safety itself is now defined—moving from perception-based confidence to continuously tested, evidence-based credibility, said Tareq Refat Ullah Khan, managing director and CEO of BRAC Bank PLC, which he believes has already become the safest bank in the country.
For decades, depositing money in a bank was widely regarded as one of the safest financial decisions available. That perception was anchored in a long history of banking stability in Bangladesh, with very few instances that could materially challenge public confidence.
In recent years, however, concerns around liquidity, asset quality and governance at several institutions have altered that baseline, making depositors far more selective in where they place their savings.
In a recent interview with TIMES of Bangladesh, Khan elaborated on how his bank remained at the top in getting stronger even during the storm in the sector.
Trust: the new currency in banking
“Trust has emerged as the most valuable currency in banking,” he said, adding that trust is not created through branding but earned through governance, financial resilience, regulatory compliance and consistent performance over time.
The starting point of institutional confidence lies in ownership structure and corporate governance.
“Strong governance provides the foundation for prudent decision-making, effective risk management and long-term stability, particularly under stress conditions.”
Independent validation, he said, has become equally important. International credit ratings and external assessments provide an objective view of financial strength and risk profile, offering insight beyond internal disclosures, institutional messaging, or marketing narratives.
Asset quality remains a core discipline indicator, with the non-performing loan ratio reflecting underwriting strength, credit culture and portfolio health, and serving as a key measure of risk management capability.
Financial strength is assessed through liquidity, capital adequacy, profitability and balance sheet resilience, while transparency is reinforced through audited disclosures, regulatory compliance and strong public accountability.
Deposit behaviour has become a market signal. During uncertainty, funds move toward institutions perceived as safer and more stable, making sustained deposit growth a reflection of confidence in governance and financial discipline.
Still, safety is not defined by any single measure.
“Ultimately, no single indicator tells the full story. Trust, governance, financial strength, regulatory compliance, transparency and customer confidence are deeply interconnected in shaping whether a bank is viewed as a safe haven,” Khan said.
BRAC Bank’s operating discipline
On the most critical factor for building a strong bank, the response is direct—“If I had to identify one factor above all others, it would be corporate governance.”
Governance is not a compliance layer but the structural backbone of banking. It determines risk appetite, protects depositor interests and shapes long-term value creation.
“Strong governance strengthens resilience; weak governance can undermine even strong capital positions,” he said.
In developed markets, governance is embedded as a non-negotiable standard and is rarely debated because it is already part of institutional culture and accountability frameworks. In Bangladesh, however, it remains a continuously evolving discipline requiring constant reinforcement.
According to Khan, the governance system operates through interconnected pillars—board oversight, risk management systems, regulatory compliance and ethical leadership.
The relationship is linear and reinforcing—governance builds trust, trust attracts stakeholders, and sustained trust drives growth and resilience across cycles.
Institutional reputation, Khan said, is ultimately not built in good times but “tested during its most challenging ones.”
Beyond general principles, BRAC Bank’s approach is defined by a clear operating philosophy built on “good governance, international-standard compliance, and full transparency”—not as aspiration, but as operational commitment maintained “through every cycle, every pressure, and every temptation the market has presented.”
Markets frequently present opportunities, but discipline lies in selection. “Not all of them are worth pursuing,” he said, underscoring a consistent refusal to chase opportunities that conflict with the bank’s core principles.
From inception, the bank aligned its objectives, strategy and governance into a single framework, ensuring consistency between intent and execution. That alignment is what prevents drift across cycles and sustains institutional discipline.
Within this framework, BRAC Bank has “established itself as the safest bank in the country,” he said.
The risk model
Risk governance operates across the full lending lifecycle—from defining risk appetite to credit assessment, underwriting discipline and continuous portfolio monitoring for early warning signals.
Protecting depositors’ money remains the foremost responsibility of any bank. Sustainable growth depends on prudent lending, strong risk management and sustained asset quality.
A key structural vulnerability in the system is concentration risk, where many banks remain exposed to a limited number of large corporate and commercial borrowers. While efficient in appearance, this creates fragility when conditions deteriorate.
Diversification across corporate, SME, retail and agricultural segments, along with geographic spread, reduces dependence on any single borrower or sector and strengthens resilience.
However, it requires long-term investment in distribution networks, field presence and deep relationships across the economy.
At BRAC Bank, deposit growth and asset quality are treated as complementary.
“The confidence that customers place in us through their deposits carries a responsibility to deploy those funds prudently,” ensuring that growth strengthens rather than weakens the balance sheet.
On industry-wide non-performing loan pressure, the stance is anchored in principle—”not to negotiate with market conditions.”
Asset quality is preserved through adherence to “good governance, international-standard compliance, and full transparency” across both expansion and stress cycles.
Importantly, not all opportunities are pursued when they conflict with institutional principles—even when that requires short-term trade-offs.
The consistency between intent and execution underpins operational stability and reinforces performance across business growth, profitability and investor confidence.
Measuring trust
At BRAC Bank, measuring customer trust is not treated as a periodic exercise but as a continuous discipline. “Without consistent testing of brand perception, a strategy risks disconnecting from reality, disabling a bank from making informed strategic decisions.”
The bank tracks external sentiment through independent brand-tracking surveys, internal perception surveys and frequent unannounced checks designed to capture signals that structured research may miss.
Most importantly, the inputs are continuously translated into action, ensuring strategies remain grounded in evidence rather than assumption.
As a result, BRAC Bank maintains a clear and continuous alignment with its strategic track, Khan said.
