After a yearlong pause, the Bangladesh Bank (BB) will resume publishing key financial health data for commercial banks, including interest rates and spreads, starting in July.
This regular publication is essential for assessing the health of commercial lenders and helping the banking regulator monitor lending rates in the post-Smart regime.
The central bank ceased releasing this crucial information in July 2023, following the introduction of the six-month moving average rate of treasuries (Smart) system for setting interest rates. The suspension made it challenging for money market observers and bankers to gauge the sector’s actual situation under the highly contractionary monetary regime.
An anonymous Bangladesh Bank official revealed that the central bank plans to resume publishing the weighted average lending and deposit rates, along with spreads, from July onwards. With the abandonment of the Smart system and a return to market-based interest rates from May 8, 2024, efforts are underway to release this vital data regularly.
Sources indicated that the spread data would aid the banking regulator in controlling lending rates in the post-Smart regime, possibly through the imposition of a maximum spread. However, the official warned that controlling spreads with a band could hinder the inflation target and market price stability, and disrupt effective monetary policy transmission.
Bangladesh, with over 60 banks, lacks a competitive market. The central bank, according to the official, should prioritize creating infrastructure to foster a more competitive banking environment.
