This report describes the development of financial soundness indicators for Bangladesh and analyzes how these can help identify key challenges to support financial sector stability in the country.

Assessing the strengths and weaknesses of a financial sector based on a set of financial indicators has increasingly become important to identify any potential problems that may lead to vulnerability that can result in a financial crisis.

Financial soundness indicators (FSIs) are compiled to monitor the health and soundness of financial institutions and markets, and of their corporate and household counterparts. With support from the Investment Climate Facilitation Fund under the Regional Cooperation and Integration Financing Facility, this report describes the development of FSIs for Bangladesh and analyzes FSIs to identify key challenges to financial sector stability in the country. A large number of FSIs are not yet available for Bangladesh, notably outside the formal banking sector including nonbank financial institutions, insurance companies, and microfinance institutions. Another key challenge for Bangladesh is the improvement of coverage, frequency, timeliness, and quality of FSIs and to make them more available to a wider audience.