Dhaka, Bangladesh (BBN)– Bangladesh has developed a coordinated supervision framework for the first time for an allied body of key regulators to work for ensuring stability in the entire spectrum of financial sector, officials said.
Concept paper titled Coordinated Supervision Framework for Bangladesh Financial System released through a coordination council meeting held at the central bank headquarters in Dhaka on Thursday with Bangladesh Bank (BB) Governor Dr. Atiur Rahman in the chair.
Under the framework of modalities, the coordination council may advise the agencies or regulators for any possible changes in regulatory policy, guidance or decisions on regulation that may impact on the objectives of the other. They will be allowed appropriate time for consultation.
However, each agency may consult another agency in relation to relevant policy issues and also media releases that may be of interest to, or will have an effect on other agencies, it added.
“It’s a new innovative supervisory mechanism in Bangladesh under which financial regulators would be interlinked for achieving better benefit from the coordination,” a BB senior official told BBN in Dhaka.
Such supervision, indeed, is a supervision mechanism of coordinated approach for regulators in the financial system towards achieving a sound supervision framework, he added.
“It’s felt necessary to put in place a robust prototype of integrated framework with a view to increasing degree of regulatory comfort, particularly as regards the concerns related to the contagion risks that could have systemic consequences,” the central banker noted.
He also said separate regulatory mechanism of financial supervisors has met the requirement of economic and financial development as a whole, but problems emerged from the absence or duplication or overlapping of regulations and a lack of consensus in regulatory standards.
“It’s imperative to set up a mechanism that is both relatively separate and cooperative to solve these problems and that maintains the operational efficiency of the whole financial system,” he noted.
Indeed, strengthening policy coordination among the regulators is an important step toward improving supervision over the country’s financial system as well as warding off potential financial risks, according to the BB official.
A Coordination Council Technical Group (CCTG) has also been formed, headed by an executive director of the central bank, for reviewing any policy issues before placing in the coordination-council meeting, another BB official said.
He also said the CCTG will work as the Working Committee to Coordination Council (CC) and will report to the CC. Financial Stability Department of the BB will act as its secretariat.
Different countries including Japan, Germany and the United Kingdom are now following the integrated approach to ensure the stability in the entire financial sector, the central banker noted.
Earlier, the framework was formulated by a working group in line with a memorandum of understanding (MoU) reached between the regulators. The framework empowers them to raise their policies for pre-or post-discussion in a CCTG meeting.
The working group comprises members from each of the regulators: Bangladesh Bank (BB), Registrar of Joint Stock Companies and Firms, Bangladesh Securities and Exchange Commission (BSEC), Microcredit Regulatory Authority (MRA), Insurance Development and Regulatory Authority (IDRA) and Department of Cooperatives (DoC) and the Bangladesh Telecommunications Regulatory Commission (BTRC).