Bangladesh's banking sector: Returned from financial crisis?

This paper evaluates the financial fragility of Bangladesh's National Banking System (NBS), providing an independent assessment of the Government's success in returning the NBS from financial crisis during 1987-1996. The evaluation utilises a comprehensive set of macroeconomic and microprudential variables, as per International Monetary Fund (2000). We find that government-owned Nationalised Commercial Banks (NCBs) and Development Financial Institutions (DFIs) were technically insolvent, and that concern should exist about the NBS's financial fragility due to exposure to adverse changes in macro-economic conditions. However, implicit government guarantee of the NCBs and DFIs protects against financial fragility leading to a banking crisis.