Creating a more efficient financial system: challenges for Bangladesh
Thorsten Beck and
Md. Habibur Rahman
No 3938, Policy Research Working Paper Series from The World Bank
Abstract:
While Bangladesh has embarked on a path to reform its financial system, most prominently by privatizing its government-owned banks, the Nationalized Commercial Banks (NCBs), a sustainable long-term expansion of the financial system requires a more substantial change in the role of government. Using recent research and international comparisons, this paper argues that the government should move from its role as an operator and arbiter in the financial system to a facilitator role. This implies not only divestment from government-owned banks, but also de-politicization of the licensing process and a market-based bank failure resolution framework that focuses on intermediation and not on the rescue of individual institutions. Most important, the government should move away from the implicit guarantee for depositors and owners to applying the existing limited explicit deposit insurance for depositors, while simultaneously relying more on market participants to monitor and discipline banks instead of micro-managing financial institutions. This redefinition of government's role should not be limited to the banking system, but applies to other segments of the financial system, such as capital markets and the micro-finance sector, and should be seen as an essential element in the governance reform agenda and in the movement from a relationship-based economy to a market and arms-length economy.
Keywords: Banks&Banking Reform; Economic Theory&Research; Financial Intermediation; Investment and Investment Climate; Corporate Law (search for similar items in EconPapers)
Date: 2006-06-01
New Economics Papers: this item is included in nep-cwa, nep-dev and nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)
Downloads: (external link)
http://www-wds.worldbank.org/external/default/WDSC ... ered/PDF/wps3938.pdf (application/pdf)
Related works:
Working Paper: Creating a more efficient financial system: Challenges for Bangladesh (2006) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:3938
Access Statistics for this paper
More papers in Policy Research Working Paper Series from The World Bank 1818 H Street, N.W., Washington, DC 20433. Contact information at EDIRC.
Bibliographic data for series maintained by Roula I. Yazigi ().