Adopting global accounting standards challenging for banks

Implementing international accounting standards, including IFRS 9, in the banking sector would be challenging given the high level of non-performing loans and the sector’s current state, according to investment experts.

Although Pakistan, Nepal and Sri Lanka have already implemented IFRS 9, which shifts loan-loss provisioning from incurred losses to forward-looking expected credit losses before default, Bangladesh may find the transition difficult as many banks are already struggling, according to the CFA Society Bangladesh, an association of chartered financial analysts.

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The society presented the findings at an event on financial analysis of the banking sector organised by the CFA Society Bangladesh and the Capital Market Journalists’ Forum (CMJF) yesterday at the CMJF auditorium in the capital.

Syed Mahbubur Rahman, a former chairman of the Association of Bankers, Bangladesh (ABB), said it is essential to assess the actual risks of bank loans and maintain adequate provisions in line with international standards.

However, implementing IFRS 9 could pose “a major challenge” for banks already under pressure from high non-performing loans and capital shortages.

Therefore, IFRS 9 should be introduced gradually while adhering to international standards and taking into account the current realities of the country’s banking sector, he said while speaking at the event as the chief guest.

Bangladesh will partly adopt IFRS 9 on a pilot basis in banking accounts this year, with full application for credit exposures from 2028.

Referring to the fact that non-performing loans in the banking sector have exceeded 32 percent, Mahbubur, also managing director and CEO of Mutual Trust Bank, said such a high level of bad loans is putting pressure on banks’ earnings, provisioning and capital.

To restore banks’ capacity, liquidity, capital, lending and non-performing loans must be addressed together. Banks need to become effective channels for financing productive sectors of the economy rather than merely serving as deposit-taking institutions, he said.

He said banking sector reforms should also be carried out gradually, taking into account the realities on the ground. A sudden major change could put pressure on banks as well as depositors and businesses.

Minhaz Zia, chairman of North Star Investments, proposed that at least 50 percent of the boards of commercial banks should comprise independent directors to strengthen corporate governance.

He also said no bank director should be allowed to sit on the bank’s credit committee.

Loan approvals should be handled by a fully independent credit team, while an internal control committee comprising only independent directors should oversee internal controls, Minhaz said.

He also stressed the need to modernise the Bankruptcy Act.

At the event, Mahtab Osmani, president of the CFA Society, and Md Munir Hossain, president of the CMJF, also spoke.

Md Iqbal Hossain, chief financial officer of Sonali Bank PLC; Sakib Chowdhury, head of research at UCB Stock Brokerage; and S M Galibur Rahman, head of research at Shanta Securities, gave presentations.

In their presentations, they said banks in Bangladesh would need at least Tk 2,000 crore in paid-up capital to be eligible to pay cash dividends, although such a requirement is uncommon in neighbouring countries.

A comparison of South Asian and Asian banking systems also shows that many jurisdictions primarily consider risk-based capital, asset quality, distributable earnings and regulatory compliance when determining whether banks can pay dividends.

The analysis highlighted the distinction by comparing BRAC Bank and National Bank. As of June 30, 2026, National Bank had about 41 percent more paid-up capital than BRAC Bank. Yet National Bank’s shareholders’ equity, excluding non-controlling interests, was negative Tk 4,670 crore, while BRAC Bank’s stood at positive Tk 11,310 crore.