"Auditing standard has to be improved. We will have to take action against auditors who will not do their jobs properly," he said inaugurating a discussion on 'Corporate Governance for Banks and Non-banking Financial Institutions' in Dhaka.

Bangladesh Enterprise Institute (BEI) organised the discussion, attended by directors and senior executives from different banks and financial institutions.

The governor said Bangladesh Bank is now building its own capacity to analyse audit reports of banks more effectively and take action against audit firms.

Lack of corporate governance in the financial sector very quickly affects the other fields adversely, particularly the real sectors, he said mentioning that the classified amounts in the private banks dipped below 4 percent at present due to reform measures that sometimes entailed criticism.

Fakhruddin stressed effective measures to stop insider lending in future, adding that such insidious practice of siphoning money out of banks by bankers is 'a thing of the past'. "It was a major problem in the past. I believe, it's not a problem today."

The central bank has introduced a fit and proper test to identify who can own a bank in order to ensure good governance, he explained.

BEI President Farooq Sobhan said practice of good corporate governance must start in the financial sector. The message for good corporate governance is profound and the consequences for poor corporate governance can be devastating.

Michael Gillibrand, co-founder and consultant of Commonwealth Association for Corporate Governance, and Dr YRK Reddy, chairman of Yaga Consulting and founder trustee of the Academy of Corporate Governance in India, made presentations on the topic at the programme.

The programme is a continuation of BEI's research, capacity building and advocacy work on corporate governance that started in 2002.