In charge of 5 administrators
The boards of five struggling Islamic banks have been dissolved, paving the way for their merger. This move marks a significant step in the government’s efforts to revitalize the banking sector.
Although it could take about two years to fully merge the banks, Bangladesh Bank has reassured smaller depositors (those with deposits up to Tk 200,000) that they can withdraw their funds soon, with this process beginning in about a month. Larger depositors, however, will access their funds in stages.
This development is particularly challenging for individual shareholders, as, despite the banks being publicly listed, they stand to gain nothing. On a more positive note, bondholders are expected to receive their returns.
During a press conference led by Bangladesh Bank Governor Ahsan H. Mansoor, it was confirmed that a few individuals temporarily assume administrative roles. Their task will be to evaluate the assets and liabilities of each bank before executing the merger into a newly formed institution.
The banks involved in this merger are First Security Islamic Bank, Union Bank, Global Islamic Bank, Social Islamic Bank, and Export-Import Bank.
Earlier in the day, the central bank had sent formal notifications to the directors of these banks, declaring them unviable under the Banking Companies Act.
According to the governor, shareholders in the merged banks will not receive any compensation.
Five managing directors from Bangladesh Bank have been appointed as administrators for this process: Salah Uddin, Mohammad Abdul Hashem, Mohammad Baduzzaman Didar, Mohammad Muxuduzzaman, and Mohammad Soukatul Alam.
“Depositors should remain calm; their funds are secure,” the governor stated, emphasizing that the newly formed bank will be stronger. He reassured everyone that their deposits would be safe.
He mentioned that depositors would earn a market-determined rate of return, and those with less than Tk 200,000 could withdraw their entire balance. For larger amounts, a formal withdrawal schedule will be published soon.
His statement was clear: “We want to avoid unnecessary panic withdrawals. This new bank is being established on solid foundations.”
The governor explained that the focus of the administration would be on four main areas: daily operational management, monitoring IT systems, assessing personnel, and restructuring branches. The central support team from Bangladesh Bank will collaborate with the management team throughout this transition. The existing staff will continue to ensure regular banking operations.
He reassured that all 75 million deposit accounts across the banks will be safe after the merger, adding that there are no immediate plans to reduce staff, though restructuring may occur later if necessary. It’s likely that some branches may consolidate, particularly in densely populated areas, while services expand into remote areas.
The merger is expected to evolve into the largest Islamic financial institution in Bangladesh, with assets around Tk 2.2 billion.
Ahsan H. Mansoor expressed the ambition to complete the restructuring within a month, stating, “Despite being government-owned, this bank will operate with a private sector efficiency.”
The full merger may take one to two years, with the objective of creating a robust financial structure. The new bank’s capital is projected to reach Tk 35,000 crore, which would be unprecedented in Bangladesh.
Regarding the situation of sponsors and shareholders, the governor remarked that many will find their shares effectively worthless. “If the value of the bank is negative, shares have no real worth,” he clarified. This means that shareholders will not receive anything from the merger.
As for bondholders of the merging banks, the governor assured that a thorough review will determine how funds were utilized, and they can expect a detailed notice soon about repayment methods.
On the legal actions against individuals involved in financial misconduct, the governor affirmed that several cases have already been filed, with assets linked to corruption being seized. Investigations are ongoing, and they are committed to recovering and addressing any looted funds.
