The Bangladesh Bank has stated that there is currently no provision to protect general investors or shareholders from losses arising from the merger of five troubled banks. However, the government may consider compensating small investors “to protect them.”
In a press release issued on 6 November, the central bank said that under the Bank Resolution Ordinance, if shareholders incur losses greater than what they would have faced had the investment become defunct, they are entitled to compensation for the additional loss.
The ordinance specifies that any such compensation will be determined based on assessments conducted by independent professional valuers appointed by Bangladesh Bank after the resolution process is completed.
On Wednesday, the Bangladesh Bank governor announced the merger of the five banks, revealing that their share values had become zero. Following the announcement, general shareholders protested, demanding the governor’s resignation and planning to lay siege to the central bank. Shortly afterwards, Bangladesh Bank issued the press release clarifying the situation.
The central bank emphasised that the Bank Resolution Ordinance was developed in line with international best practices, with technical assistance and guidance from the IMF, World Bank, and FCDO. The ordinance clearly defines the rights of depositors, shareholders, and other creditors of banks placed under resolution.
Boards Dissolved, Small Depositors to be Repaid Soon
The release stated, “Analysis of data from the Asset Quality Review (AQR) and special inspections conducted by international consulting firms revealed that these banks are operating with massive losses and have negative Net Asset Value (NAV).”
In this context, the Banking Sector Crisis Management Committee (BCMC), in its meeting on 24 September at Bangladesh Bank, decided that the shareholders of the five distressed banks must bear the losses during the resolution process.
“In light of the relevant provisions of the Bank Resolution Ordinance 2025 and the BCMC decision, there is currently no scope to preserve the interests of general investors or shareholders in the merger of these five banks. However, to protect small investors or shareholders, the government may consider compensating them,” the central bank stated.
Bangladesh Bank officially notified the boards of the five banks yesterday, declaring them “non-viable” under the Bank Company Act framework.
Although the full merger process may take around two years, the central bank assured that small depositors, with deposits up to Tk2 lakh, will be able to withdraw their funds soon, with the process expected to begin within a month. Larger depositors will be reimbursed gradually.
Today, trading of shares of the five Islamic banks involved in the merger was suspended. The Dhaka Stock Exchange (DSE) issued five separate notices announcing the suspension, effective immediately until further notice.
Additionally, the boards of the five banks have been dissolved. Bangladesh Bank informed, via letters, that the banks will now operate under the Bank Resolution Ordinance. Administrators have been appointed, with their roles defined by the central bank. Once the administrators take office, in the first phase, each depositor will receive up to Tk2 lakh from the Deposit Protection Fund.
According to Bangladesh Bank data, the five merged banks will form a new entity called Combined Islami Bank, with a total capital base of Tk35,000 crore – Tk20,000 crore from the government and Tk15,000 crore in shares issued to depositors.
Of the five banks, four were owned by S Alam Group, while one was controlled by Nazrul Islam Mazumder during the tenure of the Awami League government.