What banks must get right in 2026

In 2026, the message from the Bangladesh Bank is blunt. The year will reward prepared banks and punish complacent ones. The introduction of risk-based supervision from January 2026, supported by a new supervisory structure, stricter loan classification, prompt corrective action and a roadmap towards IFRS 9-aligned expected credit loss provisioning, marks the most serious regulatory reset in the financial system in decades.

For bank owners, managing directors and senior executives, the key question is no longer what the regulator will do, but how prepared each bank is to survive and grow under the new framework. The days of business as usual are over.

The first and most significant step for bank management in 2026 must be radical honesty. The Bangladesh Bank’s comprehensive loan classification and provisioning guidelines, introduced in 2025, have already exposed hidden stress. The era of masking weakness through repeated rescheduling is effectively over. Research by the Centre for Policy Dialogue (CPD) and the World Bank financial sector review shows that prolonged rescheduling and evergreening disguised true asset quality for years. Balance sheet strength was overstated, and investor confidence was misled.

Internal asset quality reviews must now move beyond regulatory paperwork and become a strategic tool. Banks that acknowledge losses early are more likely to earn regulatory trust, investor support and depositor confidence. Pain delayed becomes pain multiplied.

Weak governance remains the core disease of the banking industry. Studies by Transparency International Bangladesh (TIB) repeatedly show that political influence, related party lending and ineffective boards have driven reckless credit decisions. In 2026, banks will be forced to empower independent directors and risk committees, give chief risk officers real authority and enforce zero tolerance for related party transactions. Under risk-based supervision, poor governance leads to closer scrutiny, growth restrictions and reputational damage. Governance is no longer about image. It is about regulatory survival.

Past mistakes also show that balance sheet growth without proper risk pricing destroys value. The Bangladesh Bank’s revised core risk management guidelines call for credit growth that reflects risk capacity rather than ambition. Banks must reprice loans based on sector and borrower risk, exit politically exposed and structurally weak segments, and focus on small and medium-sized enterprises, supply chains and cash flow-based lending where risk can be monitored. Research by the IFC and ADB consistently shows that diversified SME portfolios, when properly supervised, perform better over time than concentrated corporate loan books. The future belongs to smarter lending, not bigger lending.

The shift towards expected credit loss provisioning under IFRS 9 is not merely an accounting change. It is a cultural transformation. Banks must move from backwards-looking loss recognition to forward-looking risk anticipation. In 2026, this means investing in data infrastructure and credit analytics, building historical default and recovery databases, and training finance, risk and business teams together rather than in silos.

The formation of new central bank divisions for technology risk, digital banking and supervisory analytics sends a clear signal. Banks must respond by strengthening core banking systems and management information systems, integrating credit, liquidity and operational risk dashboards, and stress testing liquidity under deposit withdrawal scenarios. The planned emergency liquidity assistance framework will support banks in distress, but only those with sound governance and transparency will qualify. Liquidity support is not a bailout. It is a test of trust.

With rising non-performing loans eroding capital adequacy, capital planning must become a strategic priority, not a year-end formality. IMF-supported financial stability assessments show that undercapitalised banks lose lending capacity, credibility and regulatory flexibility. Balance sheet repair through asset sales, mergers or structured resolution of weaker institutions will therefore remain on the table.

The banking crisis is painful, but it is also an opportunity to rebuild trust, discipline and competence. The banks that succeed in 2026 will be the most honest, disciplined and prepared. In the new era of Bangladeshi banking, ignored risk disrupts growth, while managed risk restores confidence.

The writer is a senior banker