Bangladesh Bank has officially begun the process to merge five weak Shariah-based banks into a single large Islamic bank. The affected banks have been declared non-operational, their boards dissolved, and administrators appointed to manage their affairs.
Bangladesh Bank Governor Dr Ahsan H Mansur assured depositors that their funds will remain secure and there is no cause for concern. He also confirmed that no employee will lose their job. These remarks were made during a press conference at Bangladesh Bank’s main office, attended by four deputy governors, executive directors, directors, and officials involved in the merger process.
Dr Mansur explained that Bangladesh Bank has declared the five banks non-operational with official letters sent to the company secretaries of the respective banks. Since Wednesday, the banks’ boards have been officially dissolved. He thanked board members for their efforts in trying to stabilise the banks. Simultaneously, interim administrators have been formally appointed by letter, assigning one administrator and a supporting team to each bank.
The Governor outlined four key responsibilities for the interim administrators: to ensure the banks remain functional, to maintain smooth processing of large payments, remittances, and Letters of Credit (LC) settlements. Furthermore, they have been tasked with integrating IT infrastructure under central management, analysing staffing and human resource situations for necessary reorganisation, and logically consolidating overlapping bank branches within the same area.
Dr Mansur highlighted that the primary objective is to free the banks from weak financial management and create a strong banking institution. Though initially state-owned, the new bank will be run professionally with a board, similar to a private bank. Its paid-up capital will be BDT 35,000 crore, the highest among banks in Bangladesh. It will be the country’s most powerful financial institution, operating based on Shariah principles.
Addressing depositors, the Governor reassured them that as the new bank will be government-owned, there is no reason for alarm. Profit will be paid based on market rates from the day of merger. Measures have been implemented to prevent mass withdrawals. Depositors with balances of BDT 200,000 or less will be allowed full withdrawal immediately, while those with larger deposits will be able to withdraw in stages, with details to be announced via gazette notification. This merger process aims to protect the funds of over 7.5 million depositors.
When asked whether the next government would continue the process, Dr Mansur replied that the merger is for the long-term stability of the people, the country, and the financial sector. Its successful completion will bring significant stability and help restore economic confidence, protecting the interests of approximately 7.5 million depositors.
He indicated that the merger will take considerable time due to its complexity and cannot be completed overnight, within a month, or even six months. It will proceed gradually, with efforts to conclude as quickly as possible. He hopes future governments will maintain the initiative.
Regarding shareholders, the Governor stated that the equity value of shareholders in these five banks is now negative, so their shares will be considered worthless. No compensation will be paid. According to international norms, shareholders receive dividends but must also bear losses. The authorities are not taking punitive measures against shareholders; their shares will simply be valued at zero.
Previously, on 9 October, the advisory council had approved the formation of the state-owned Islamic bank based on Bangladesh Bank’s proposal and recommendations from the Financial Institutions Division. Over the past year, the financial condition of these banks has deteriorated continuously. According to Bangladesh Bank, they have faced liquidity shortages, large amounts of classified loans, provisioning deficiencies, and capital shortfalls, bringing them to near insolvency. Despite repeated liquidity support, there was no improvement.
Administrators appointed are Executive Director Md Shawkat Ul Alam for Exim Bank, Executive Director Muhammad Badiul Alam Didar for First Security Islami Bank, and Md Salah Uddin for Social Islami Bank. Director Muhammad Abul Hashem has been assigned Union Bank, and Maksuduzzaman will oversee Global Islami Bank. Each administrator is supported by four additional Bangladesh Bank officials.
JD