Five banks are finally merging

Business Report :

The Bangladesh Bank has decided to appoint administrators to oversee the merger of five crisis-hit Shariah-based private banks into a single state-owned Islamic bank.

The decision was taken at a special board meeting on Tuesday chaired by BB Governor Ahsan H Mansur, said BB spokesperson Arif Hossain Khan.
“The board has finalized the merger of five Shariah-based Islamic banks.

Under the Bank Resolution Ordinance, temporary administrative teams comprising multiple members will be appointed to each bank to oversee the process,” Arif Khan informed the media.

He said amendments to the Bank Resolution Ordinance and other supporting laws will be introduced as needed to facilitate the process.

Each bank will be assigned an administrator supported by a team of four officers. The initiative aims to safeguard depositors’ funds and restore public confidence in the banking sector.

According to the government’s plan, First Security Islami Bank, Social Islami Bank, Global Islami Bank, Union Bank, and Exim Bank will be consolidated into a new state-owned entity, provisionally named United Islami Bank. The central bank is expected to issue a license for the new bank soon.

Bangladesh Bank officials believe the merger will help end long-standing irregularities and corruption in the Islamic banking sector, while restructuring is expected to rebuild customer trust.

Following the merger, the existing boards of directors and managing directors will be dissolved, and the shares of the merged banks declared void.

All assets and liabilities will be transferred to the new entity, which will begin operations as United Islami Bank.

To recover government investment, shares of the new bank will eventually be sold to the private sector. Large depositors may be given the option to convert part of their deposits into shares, while small depositors will face no restrictions on withdrawals.

Reports indicate that, due to various irregularities during the previous government, 48% to 98% of loans in these banks have become non-performing.

Of the Tk35,200 crore required for the merger process, the government will provide Tk20,200 crore. Four of the banks — First Security, Union, Global, and Social Islami — have long been under the control of the S Alam Group, while Exim Bank is owned by Nazrul Islam Majumder, Chairman of the Nassa Group.

Earlier, in June this year Bangladesh Bank planned to merge five troubled Islamic banks, the country’s largest financial sector consolidation in recent memory.

The merger effort gained momentum after Bangladesh Bank appointed two international firms in January to conduct asset quality reviews of the banks. The review, which is now nearing completion, aims to assess the actual financial condition of the institutions.

The central bank’s plan is expected to restore depositor confidence and instill discipline in a sector long plagued by mismanagement, insider lending and capital shortfalls.