The bank plans to engage with international investors such as IDB, IFC, World Bank and Al-Rajhi Group
Islamic bank logo. Photo: Collecting
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Islamic bank logo. Photo: Collecting
Highlights
- Banks move to shareholders related to financial reputation damages
- A central law team was established to pursue compensation lawsuits
- 82% of the bank’s shares held by S Alam and affiliates have been frozen by regulators
- Banks are seeking foreign investors to sell frozen stocks and settle membership fees
Islami Bank Bangladesh Plc has established a 14-member central legal team to address allegations of financial fraud involving major institutional shareholders, including S Alam Group and its affiliates.
The team approved at the bank’s recent audit committee meeting will provide legal assistance, prepare complaints, review legal notices, and guide the bank on filing a case against the institutional shareholders responsible for financial and reputational damages.
S ALAM Group and its affiliates own nearly 82% of the total stake in the bank, frozen by securities regulators last August, shortly after the collapse of the Awami League government, where SALAM had close ties.
The Islami Bank will also approach international investors such as the Islamic Development Bank (IDB), International Finance Corporation (IFC), World Bank and Al Rajhi Group, subject to regulatory approval.
The Audit Committee forms a task force to evaluate damages
In parallel development under the miscellaneous Agenda I, the Audit Committee of Islami Bank (collaboration with senior management) established a five-person task force to assess damages caused by alleged lawsuits of S ALAM Group and related entities between January 2017 and July 2024.
The task force will include senior officials such as Mahmudur Rahman, the bank’s assistant managing director, as well as executives from various financial and investment sectors.
Their mission is to investigate the quality of their assets, review findings from an ongoing forensic audit covering 46 investment clients, including Nabil Group, and quantify both tangible and reputational losses.
The terms of mandate also allow the task force to work with the newly formed legal pool to prepare compensation litigation, seeking relief for both physical damage and wider consequences, including loss of goodwill and reputational harm at both national and international levels.
This initiative marks key steps by the Islami Bank, restoring transparency and accountability in its operations, and protecting its interests and stakeholders.
Islamic banks were once considered the flagship Islamic banking institution of South Asia. When IBBL was founded in 1983, foreign investors held about 70% of the bank’s capital.
These included major Middle Eastern institutions such as the Islamic Development Bank (IDB), Al Rajhi Co., Ltd. for Industry and Trade, Kuwait Financial House, Bahrain Islamic Bank and Dubai Islamic Bank. Together, they played a key role in shaping the initial growth, strategic orientation and reliability of the banks, both in regional and international markets.
The decline began around 2013, but the most important turning point came in 2017 when the S ALAM Group (a Chatogram-based conglomerate) effectively managed the bank. By that year, foreign stockholdings had fallen by about 32% from 70%.
Bahrain Islamic Bank sold its shares in 2014. Dubai Islamic Bank left in 2015. Kuwait Finance House followed in 2017.
Four days after the request from the Bank of Bangladesh on August 20 last year, the Bangladesh Securities and Exchange Commission (BSEC) frozen 131.89 crore of shares held by S. Alam Group, which represents 81.92% of IBBL’s total shares, and its affiliates, concentrated financial misconduct and bank ownership that violated bank regulations.
A senior Islamic Bank official told TBS at the bank’s 561st Audit Committee meeting that it has been decided that S ALAM Group’s frozen shares will be sold to adjust the bank’s membership fees. New investors are being sought for these stocks.
“To that end, Islamic Banks will send proposals to multinational investment companies overseas. Soon, the chairman of the Islamic Bank and several directors will visit the US with the sole purpose of attracting new foreign investments,” he said.
S Alam Group and its affiliates are said to have secured TK1.05 trillion from Islami Bank through both direct and indirect means and have washed the money overseas. Of these, TK85,445 crores were collected directly, and TK20,038 crores were collected indirectly.
