Dhaka, Bangladesh (BBN) - The World Bank has agreed to provide US$400 million for the Financial Sector Support Project (FSSP) –II aiming to strengthen financial safety net and crisis preparedness, officials said.
Under the proposal, Bangladesh will achieve at least six outcomes including Distressed Asset Management Act (DAMA) enacted and stress test based on AQR (Asset Quality Review) for all the scheduled banks within the second and third years of the project. Total tenure of the project will be five years.
Non-performing loans (NPL) resolution guidelines will be issued and enforcement departments will be established at the central bank during the period under the review.
Besides, two acts – Financial Stability Act and Deposit Protection Act –will be issued under the project.
However, the banking sector particularly enhancing deposit insurance system (DIS), strengthening bank restructuring and resolution will be focused with financing worth $300 million.
Talking to the BBN, a senior official of the Bangladesh Bank (BB) said these are performance-based credits (PBCs) under a new concept introduced by the World Bank under the project.
An alternative to these PBCs may be inclusion of an on-lending component like previous project (FSSP) of the World Bank, he added.
"There are also requiring enacting some new laws which will be combined efforts of the central bank and the government," the central banker explained.
Another $100 million will be invested in IT, databases and systems for modernizing financial-market infrastructure of the central bank of Bangladesh along with capacity building of the BB officials for dealing with financial issues in this critical era.
BBN/SSR/AD