Bangladesh’s banking system is living through its most severe stress test since independence. The numbers alone tell a grim story ~ nearly a quarter of all loans are in default, billions in assets have turned unrecoverable, and liquidity has thinned despite an official tightening of policy. Yet the problem runs far deeper than the current figures. It is the culmination of a long-standing pattern in which politics, rather than prudence, dictated credit decisions and eroded public confidence in institutions meant to safeguard savings and investments.

The roots of this crisis stretch back decades. For years, powerful business interests and politicians treated commercial banks as private vaults, borrowing large sums against inflated collateral and using political connections to avoid repayment. The result was a slow hollowing out of the financial system, a build-up of bad loans masked by cosmetic accounting and a culture of impunity that rewarded defaulters and punished discipline. Even when the economy was growing rapidly,........

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