Greece plunged into a deep economic crisis during the post-2008 period, a disaster widely regarded as the world’s longest-running economic crisis of the past half-century. It shook the entire eurozone and pushed nearly all of Greece’s banks into insolvency. Unable to meet withdrawal demands, Greece shuttered most of its ATMs. At its peak, non-performing loans hit 49 percent.
That same distressed banking sector has since staged a sharp recovery. Non-performing loans have dropped to just 3.3 percent, and the Greek economy has revived on the back of stronger lenders.
Greece engineered this turnaround through a radical banking overhaul over the past decade. In 2008, at the outbreak of the crisis, the country had 64 banks and financial institutions. As part of the recovery and reform programme, the government consolidated that number to only four. Authorities recapitalised the big four while either closing the remaining banks or transferring them after recapitalisation. The Greek government and European funds supplied roughly €50 billion for the effort — approximately BDT 7.25 trillion at an exchange rate of BDT 145 to the euro.
Greece went further than just capital injections. Under the Hellenic Asset Protection Scheme (HAPS), it launched the largest bank recovery project in history. The state guarantee scheme, codenamed ‘Hercules’, securitised about €57 billion in bad loans and purged them from bank balance sheets. Together with an improved sovereign credit rating, these measures have now turned Greece into one of Europe’s fastest-growing economies.
Bangladesh does not yet face insolvency on the Greek scale. But for years its economy has been caught in sluggish GDP growth, below-target revenue collection, climbing government debt and interest costs, high inflation, and persistent unemployment. The current government, in office since being elected through the 13th parliamentary election in February, has found these crises a persistent headache.
The banking and financial sector presents an even darker picture. Of Bangladesh’s 62 scheduled banks, nearly half are now weak. A dozen cannot return depositors’ funds. The number of banks with capital shortfalls has reached 24. The sector’s overall non-performing loan ratio now stands at 30.60 percent, down from more than 35 percent last September.
Non-bank financial institutions are in even worse shape than the country’s banks. Of the 35 licensed by the Bangladesh Bank, more than 20 are now struggling to survive. The central bank has moved to close nine. At some, non-performing loans account for 99 percent of all lending. Across the sector, the average NPL ratio has hit 37.11 percent. One-third of Bangladesh’s 82 insurance companies are also in a precarious state.
The government and the central bank are now searching for a route out of the economic downturn and the banking crisis. The previous interim government attempted several banking reforms, but none proved decisive. The push to merge five Shariah-based banks is itself now in jeopardy. Meanwhile, efforts to pare back non-performing loans through rescheduling and policy support are no durable fix, according to multiple economists, bank executives and sector insiders.
Experts argue Bangladesh could look to Greece’s model for economic recovery and restructuring the banking sector. Many countries across Asia, Europe, Latin America and Africa have weathered crises akin to Greece’s and gone on to prosper. Bangladesh, by contrast, remains stuck at the earliest stage of a resolution.
Dr Zahid Hussain, an economist and former lead economist of the World Bank’s Dhaka office, said: “In the wake of irregularities, corruption and economic recession, many countries have faced banking sector crises at various times. Yet we have many examples of successful turnarounds — Greece, Ukraine, Turkey, Brazil, Argentina among them. Many African nations, too, are now on a growth path after prolonged turbulence. We can study those reform and recovery models and take lessons from them to move ahead.”
He added: “The previous interim government took several initiatives to reform the financial sector, including the banks. The legal reforms, such as the Bank Resolution Ordinance, could resolve the situation if effectively enforced. The problem is we lack policy continuity. And policymakers can’t hold steady on a decision once taken.”
Economists see many parallels between Bangladesh’s financial crisis and the one that ravaged Greece. Greece’s crisis originated in a decade of debt-fuelled growth before 2008. Data from the World Bank, the IMF and other agencies show that the economy expanded rapidly from the mid-1990s to 2007. Eurozone membership and low interest rates made borrowing easy. Financial liberalisation and cheap credit triggered a surge in private lending, particularly consumer loans. That eroded personal savings and increased foreign debt.
The Greek government, meanwhile, ramped up spending quickly in the name of development. Tax revenues and productivity failed to keep pace. Government debt mounted but authorities concealed budget deficits. Tax evasion became epidemic. Social spending soared to abnormal levels. The economy leaned heavily on imports and consumption. Corruption among politicians and civil servants deepened.
After the 2008 global financial crisis, investors grasped that Greece’s true debt position was far worse than reported. Confidence in Greece collapsed across international markets. Borrowing costs soared and the country became almost unable to secure new loans. The economic crisis soon toppled the government.
In 2007, Greece’s real GDP per capita stood at €22,500. By 2014, it had fallen to €16,830 — a drop of 25.2 percent. Over the same period, unemployment climbed from 8.4 percent to 26.5 percent, and youth unemployment surpassed 50 percent. Thousands of businesses shut, with small and medium-sized enterprises the hardest hit. A deposit run swept the banks. Recovery, when it came, was glacial: from 2014 to 2016, real GDP per capita remained nearly flat.
The economic crisis fused sovereign debt distress with a banking sector meltdown. In 2012, Greece restructured its government debt, slashing the value of the debt from €205.6 billion to €98.5 billion — a reduction of roughly 52.1 percent. It marked the largest sovereign debt restructuring in recorded history. The rescue package Athens secured from eurozone countries and the International Monetary Fund to weather the crisis also ranked among the largest bailout programmes ever mounted.
In the post-2008 period, Bangladesh’s then-Awami League government, now ousted, likewise borrowed heavily from domestic and foreign sources in the name of development. Bangladesh Bank data show the total outstanding government debt from domestic and foreign sources now stands at roughly BDT 24 trillion. When the Awami League took office in 2009, the government’s debt stock was only BDT 2.76 trillion. During its one-and-a-half decades in power, the debt stock ballooned by more than BDT 15.5 trillion. Foreign debt alone now accounts for $113 billion, of which the government and state-owned entities owe $93 billion.
Even after its finances unravelled, the Greek government borrowed from banks at high interest rates. Banks, drawn to the elevated yields, expanded their lending to the state — loans the government later proved unable to repay. The 2012 restructuring brought sharp interest-rate reductions on government bonds. It was those rate cuts that triggered the cascading collapse of Greek banks.
Bangladeshi banks now display a similar preference for lending to the government. Treasury bill and bond yields, which stood at 2 to 5 percent as recently as 2022, have traded at 10 to 13 percent for the past three years. Banks, reckoning there is no default risk when lending to the state, have diverted credit away from the private sector. In the 2024–25 fiscal year alone, the government spent more than BDT 1.34 trillion on interest payments. If the government now cuts rates on these instruments, Bangladesh’s banking sector could mirror the Greek outcome.
Central bank data show government borrowing surged 14.90 percent in the 2024–25 fiscal year. In the twelve months to February this year, it more than doubled to 33.57 percent. Over the same period, private-sector credit growth crawled to just 6.03 percent.
The private sector’s contraction has saddled the banking system with extreme levels of bad loans — the legacy of a decade and a half of rampant graft and plunder after 2008. At the end of last December, non-performing loans exceeded BDT 5.44 trillion, equivalent to 30 percent of banks’ total disbursed credit. The amount of bad loans had been close to BDT 6.5 trillion in September last year, when the NPL ratio touched roughly 36 percent. Banks trimmed the headline figure through loan rescheduling in the final quarter of that year.
Syed Mahbubur Rahman, managing director of Mutual Trust Bank, argues that banks are now more inclined to lend to the government precisely because private-sector credit demand has evaporated. He told Bonik Barta: “The private sector has contracted because of multiple economic crises. Many banks aren’t in a position to make fresh investments either. Given the state of bad loans, bankers are now even afraid to lend to entrepreneurs.”
He added: “To push the economy forward, the banking sector must be reformed. The problem is that when we take one step forward on reform, we slide three steps back. The good measures initiated during the previous interim government’s tenure should be carried forward without question. That’ll send a clear message to the offenders, and ordinary people will also regain confidence in the government’s actions. Our fundamental problem is governance. Without it, there’s no way out. To advance the banking and financial sector, good governance is a must.”
As part of its post-2008 banking reforms, Greece slashed the number of banks and financial institutions from 64 to just four through closures and mergers. Seven cooperative banks had their licences revoked after failing to raise capital. Proton Bank, T Bank, Lamia Cooperative Bank, Lesvos-Limnos Cooperative Bank and several other small lenders were pushed into liquidation and special resolution. The post-crisis restructuring concentrated the Greek banking sector in the hands of four systemic banks: National Bank of Greece, Alpha Bank, Eurobank and Piraeus Bank. Together they now control 95 percent of Greece’s banking assets.
Bangladesh Bank spokesperson Arif Hossain Khan argues that capital injections are the way out of the crisis. Speaking to Bonik Barta, he said: “As a case study, we decided to merge five banks. We’ve faced all manner of obstacles in implementing it. Frankly, no culture of bank merger has developed in this country, and customers are unfamiliar with such steps. That’s why the problems are worse. The government must take hard decisions on bank reform. And that requires a political decision.”
Over the past decade, however, Bangladesh has already injected capital and liquidity into several banks — but to no avail. The government poured nearly BDT 35 billion into the ransacked BASIC Bank in the three years after 2009. Even after 12 years, the bank could not absorb the blow of BDT 40 billion in irregularities and graft. Instead, it has racked up a net loss of almost BDT 60 billion to date.
Padma Bank, another private lender stripped bare by looting, received BDT 7.15 billion in capital from state-owned banks alongside several billion taka in liquidity and policy support. But the bank, which opened in 2013, could not be revived either. Bangladesh Bank also funnelled billions of taka in liquidity support to Shariah-based banks ravaged by graft and plunder. They, too, failed to turn around.