Over the past several months Bangladesh Bank has been introducing substantial changes in bank supervision techniques and approaches, in a risk-focused strategic repositioning of BB's onsite and offsite supervision architecture, towards better safeguarding of institutional and systemic soundness of our banking sector. As part of this initiative we have been holding a series of supervision town hall meetings with field level BB supervisory staff aimed at eliciting their wholehearted engagement in and commitment to the newer supervision approaches focusing on how well the risks inherent in lending and other banking businesses are being assessed and managed, and on how well a bank's corporate governance and internal control structures are monitoring and overseeing their risk management practices. The process began with a town hall meeting at head office, followed by similar regional events at Chittagong, Barisal and lastly at Rajshahi on 15 July 2012. The theme for the Rajshahi event was "stronger branches, stronger banks; controlling risks and enhancing returns at branch level". In my inaugural address at the Rajshahi event I outlined some of my thoughts and ideas on the subject for guidance of the participating field level supervisory staff at our Bogra, Rajshahi and Rangpur offices; I wish to share these here with readers.
We are putting in place an integrated prudential regulatory and supervisory structure in full harmony with evolving international best practice standards; strengthening the legal framework and closely coordinating onsite and offsite supervision functions. We are intensifying supervisory focus on risk appraisal and management practices of banks in their lending and other business functions; as also on how effectively their corporate governance and internal control functions are exercising oversight on adherence to the established risk management processes and practices. Branches of banks are coming under closer attention in this respect. Bank branches are playing pivotal role in deposit mobilization and promotion of financial inclusion with lending and other banking services to agricultural farmers, SMEs, women entrepreneurs and environmentally beneficial projects; customer interest protection cells at bank branches play important role in improving standards of services extended to clients. Substantial part of the country's economic activities including banking take place in regions outside Dhaka; for example, about 35 percent of total banking system deposits are from bank branches outside Dhaka. The share of bank branches in Rajshahi region in total deposits in the banking system is relatively modest, but the number of depositors is not small. BB's supervision activities at bank branch level have important role in preserving public confidence on banks with oversight on soundness, customer service standards and customer interest protection.
Economic growth and development in Bangladesh have progressed hand in hand with growth and development of the financial sector. Local communities clearly feel the economic impact of presence of bank branches in their neighborhoods. Presently 47 scheduled banks and 31 non bank financial institutions are functioning under close BB supervision. The banks have extended credit amounting around Taka 3500 billion against deposit mobilization of around Taka 4500 billion. The financial institutions, although not as large as banks, are extending important services like lease financing particularly suitable for small and medium scale entrepreneurs. There are also other non-bank financial service providers in Bangladesh not licensed or regulated by BB in ever growing numbers, like Micro Finance Institutions (MFIs) extending credit in small amounts to people of small means, especially women. Equity and debt securities are being traded at the Dhaka and Chittagong stock exchanges through brokers and dealers. Merchant banks are helping raise investment funds for business expansion and employment creation by issuance of new equity and debt securities in the capital market.
Insurance companies are protecting households and businesses with covers against losses from various risks. The wide range and diversity of financial institutions and their functions pose considerable challenge for the authorities in maintaining steady growth minimizing risks of crisis and instability from excessive risk taking or through contagion from financial crises elsewhere.
During the last five years we have been seeing increasing spread of global financial contagion, with sickness of one large financial institution sickening another one with exposure to it, triggering chains of institutional collapse in the modern day closely integrated global financial system. In 3008 collapse of the securities firm Lehman Brothers caused insolvency of several banks with large credit exposure to it. Large international banks in US and elsewhere froze transactions with each other due to worries over each other's increasingly complex balance sheets stuffed with opaque, hard to value assets. The situation forced governments of these countries to take over many of these banks for restructuring, merger with a healthy institution or liquidation, at great cost burden for taxpayers. Inability of the distressed financial systems to finance real sector economic activities precipitated sharp economic slowdown with falling employment and output in many of the advanced industrialized countries, situations many of these are still to recover fully from.
Such crisis situations may seem remote and unfamiliar to our supervision staff, they may think that these are problems for the advanced high income economies. It is true that there has been no bank failure or systemic instability in our financial sector, but in the post crisis global financial scene we cannot sit back relaxed and complacent. This is why we have undertaken a comprehensive revamp of our regulatory and supervisory structure to bolster the safeguards underpinning financial sector stability. My colleagues will discuss with you the details of the steps being taken, but let me highlight some of the important initiatives here. You know that BB has already established a new Financial Stability Department. Its main responsibilities include in-depth analysis of factors underlying financial stability, forecasting risks that may impair stability and recommending corrective policy steps. The new department will look not only at banking sector stability risks but holistically at all risks to stability of the entire financial system, extending the horizon of our macroprudential supervision; which involves top down eagles eye viewing of the financial system in entirety, looking particularly for systemic vulnerabilities that can spread from one bank to another or from one segment of the financial system to another.
The new department will monitor and analyze impacts on financial institutions and markets from trends of credit growth, interest and exchange rate trends, capital flows, commodity prices, asset price trends in stock and real estate markets and so forth, bringing out the risk factors to stability and suggesting mitigation measures.
Avoiding financial crises and restoration of confidence following a crisis become easier if banks and financial institutions maintain adequate capital and liquidity buffers, and if themselves and their regulators have c