The Bangladesh Bank is set to establish a dedicated Bank Restructuring and Resolution Fund of up to Tk40,000 crore to rescue and restructure failing banks, reducing reliance on taxpayer-funded bailouts. The initiative draws inspiration from the European Central Bank’s resolution framework, under which banks contribute a portion of deposits to a dedicated fund for handling financial distress.
Under the new framework, banks will pay an annual premium of up to 0.25% (25 paisa per Tk100 of deposits), significantly higher than the current 0.07% charged for the deposit insurance protection fund. Over time, the fund is expected to accumulate between Tk30,000 crore and Tk40,000 crore, enabling the central bank to intervene independently when banks face severe financial stress.
“Bank resolution is a continuous process. That is why we have created a separate Bank Resolution Department,” said Bangladesh Bank Governor Ahsan H Mansur. The department monitors banks, identifies early signs of weakness, and intervenes through restructuring, mergers, or orderly liquidation. Currently, five banks are under resolution, a process supported by approximately Tk20,000 crore in government assistance.
Simultaneously, the central bank will liquidate nine non-bank financial institutions (NBFIs). As these entities are not covered by deposit insurance, the government will provide Tk5,000 crore to repay individual depositors.
How the Resolution Fund Will Operate
The Bank Resolution Ordinance 2025 outlines the fund’s governance and investment strategy:
The fund will adopt a prudent, safe investment strategy, primarily investing in government obligations.
Bangladesh Bank will manage, administer, and supervise the fund, formulate policies, and finance resolutions of scheduled banks.
Premiums will be risk-based, adjusted according to a bank’s size and financial stability. Banks failing to pay premiums on time will face penalty interest, and repeated default may result in restrictions on deposit-taking.
Fund Mobilisation Timeline:
| Premium Rate | Expected Fund Size | Timeline |
|---|---|---|
| 0.25% of deposits | Tk30,000 crore | 5 years |
| 0.25% of deposits | Tk40,000 crore | Long-term target |
Governor Mansur noted that gradually raising premiums from 0.07% to 0.25% could mobilise nearly Tk30,000 crore within five years, allowing reduced provisioning requirements once the fund strengthens.
Expert Perspectives
Reactions among financial experts are mixed:
Muhammad A (Rumee) Ali, former deputy governor of Bangladesh Bank, cautioned the fund could subsidise poor governance, as stronger banks might support weaker peers.
Mustafizur Rahman, Centre for Policy Dialogue, welcomed the move, highlighting that similar mechanisms in Europe and the U.S. post-2007 financial crisis reduced taxpayer burden while promoting responsible banking.
Syed Mahbubur Rahman, MD of Mutual Trust Bank, warned the fund’s success depends on broader reforms addressing governance, political interference, and high non-performing loans. He also noted that the proposed 0.25% premium is far lower than the ECB’s 1% benchmark.
Sohail RK Hussain, MD of Bank Asia, called it a positive and necessary step, emphasising risk-based, transparent implementation alongside deeper sectoral reforms.
Experts agree that while the fund alone cannot solve structural challenges, it is a critical step toward strengthening financial resilience and reducing dependence on government bailouts.