Bangladesh Bank has clarified that under the Bank Resolution Ordinance 2025, there is currently no legal provision to protect the interests of investors or shareholders in the ongoing merger of five Shariah-based banks.
In a statement issued on Thursday night, the central bank said the ordinance contains no clause that allows for the safeguarding of general investors or shareholders during the merger process.
However, the government may consider compensating small investors to protect their interests, according to a report by UNB.
The merger of the five Islamic banks — First Security Islami Bank, Global Islami Bank, Union Bank, EXIM Bank, and Social Islami Bank — has triggered widespread debate and concern among investors in the capital market.
Earlier, Bangladesh Bank Governor Ahsan H Mansur stated that the shares of these financially distressed banks had become worthless, with Tk 10 face-value shares turning negative, leaving investors with no recoverable value.
According to the central bank, the Bank Resolution Ordinance 2025 has been formulated in line with international best practices and with technical assistance and feedback from the IMF, World Bank, and the UK’s Foreign, Commonwealth and Development Office (FCDO).
The ordinance clearly outlines the rights of depositors, shareholders, and other creditors of banks under its jurisdiction.
Under four specific provisions of the ordinance, Bangladesh Bank may impose losses on shareholders, responsible persons, and holders of Additional Tier-1 and Tier-2 capital (excluding subordinated debt holders) of any scheduled bank placed under resolution.
In addition, Section 40 of the ordinance allows for compensation to shareholders if they incur losses greater than those they would have faced under a liquidation scenario.
Such compensation will be determined based on an independent valuation conducted by a valuer appointed by Bangladesh Bank once the resolution process is complete.
The central bank said that analyses of data from the Asset Quality Review (AQR) and special inspections conducted by international consulting firms revealed that these banks are suffering from severe financial losses and hold negative net asset values.
During a meeting of the Banking Sector Crisis Management Committee held at Bangladesh Bank in September, it was decided that the shareholders of the five troubled banks would bear the burden of these losses during the resolution process.
Given this context, the central bank reiterated that there is currently no scope to protect general investors or shareholders in the merger process, though the government may consider compensation measures for small investors.