The introduction of Bangladesh’s new bank resolution framework has triggered renewed controversy in the country’s financial governance debate, with Transparency International Bangladesh warning that key provisions in the legislation could enable former owners of failed banks to regain control, potentially undermining long-standing reform efforts in the banking sector.
In a statement issued on Monday (13 April), the anti-corruption watchdog described clauses allowing previous shareholders of merged or distressed banks to return to ownership structures as “self-defeating”. It argued that such provisions risk weakening institutional stability and could reopen pathways to the governance failures that contributed to past banking crises.
Concerns Over Return of Former Owners
TIB cautioned that the revised Bank Resolution Act creates a structured pathway for individuals or groups previously associated with the mismanagement of troubled financial institutions to re-enter ownership roles.
According to the organisation, this development threatens to reverse progress made in improving discipline, transparency, and regulatory oversight within the banking system. It further warned that instead of strengthening accountability mechanisms, the framework could inadvertently institutionalise impunity by allowing actors linked to past irregularities to regain influence under regulatory approval.
Departure from Earlier Legal Safeguards
The watchdog highlighted a significant policy shift from the earlier Bank Resolution Ordinance 2025, under which former owners of failing banks were reportedly barred from reclaiming ownership—even after settling outstanding liabilities.
Under the newly enacted framework, a revised provision—identified as Section 18(a)—is said to alter this restriction. It reportedly permits former stakeholders to return to ownership positions under certain conditions, a change critics argue replaces strict accountability safeguards with a more permissive rehabilitation model.
Financial Structure and Governance Concerns
TIB Executive Director Dr Iftekharuzzaman criticised the design of the new framework, arguing that it risks rewarding individuals previously linked to financial misconduct rather than ensuring meaningful accountability and deterrence.
He also raised concerns over the financial structure governing the reacquisition of bank ownership. According to his remarks, the framework reportedly allows former owners to pay a limited upfront amount, with the remainder spread over time under concessional terms. He questioned whether such arrangements meet standards of fairness, fiscal prudence, and enforceability.
Key Concerns Raised by TIB
| Area of Concern | TIB’s Position |
|---|---|
| Ownership reinstatement | Risk of return of previously discredited owners |
| Payment structure | Low initial payment with deferred settlement |
| Accountability mechanism | Weak enforcement of financial responsibility |
| Governance integrity | Possible conflicts of interest in regulatory oversight |
| Systemic risk | Potential burden shift to depositors and taxpayers |
Questions Over Regulatory Capacity
The organisation further questioned how compliance with post-recovery conditions would be effectively monitored, citing concerns over the independence, capacity, and potential conflicts of interest within regulatory institutions.
It warned that weak enforcement mechanisms could allow influential stakeholders to restructure obligations in ways that ultimately transfer financial risks to depositors, taxpayers, and the wider economy. TIB also cautioned that such provisions could erode confidence in the banking sector by blurring the boundary between accountability and rehabilitation.
Broader Governance Critique
Dr Iftekharuzzaman argued that the legislative shift reflects a broader pattern in financial sector governance, where structural reforms do not necessarily translate into stronger accountability outcomes.
He further suggested that changes in institutional frameworks alone are insufficient unless accompanied by firm safeguards preventing the re-emergence of ownership structures linked to past financial failures. According to him, meaningful reform requires not only restructuring mechanisms but also robust enforcement and exclusion principles.
Call for Accountability-Driven Reform
TIB emphasised that any credible banking sector reform must prioritise transparent legal processes, strict enforcement of financial obligations, and clear disqualification of individuals responsible for major banking failures.
Without such safeguards, the organisation warned, the new legal framework risks failing to deliver substantive governance improvements and could instead perpetuate cycles of instability within the financial sector.
Outlook
The ongoing debate over the Bank Resolution Act underscores a persistent tension in Bangladesh’s banking reform agenda: balancing financial stability with governance accountability.
While policymakers argue that structured resolution tools are essential to safeguard depositors and maintain systemic stability, critics insist that insufficient restrictions on ownership reinstatement could undermine the credibility and effectiveness of reform efforts.
As implementation progresses, regulatory authorities are expected to face heightened scrutiny over whether the framework can genuinely reconcile crisis management needs with long-term institutional integrity