Bangladesh Bank on Thursday said there is currently no scope to protect the interests of ordinary shareholders of the five Shariah-based banks being merged, though the government may later consider compensation for small investors.
The Bank Resolution Ordinance 2025 empowers the central bank to impose losses on shareholders, responsible persons and holders of Additional Tier-1 and Tier-2 capital of banks under resolution.
Section 40 of the ordinance, however, allows compensation if shareholders incur losses greater than they would have under liquidation, based on an independent valuation to be commissioned by Bangladesh Bank.
In a statement, the central bank said the ordinance was formulated in line with international best practices and with technical support from the International Monetary Fund (IMF), the World Bank and the Foreign, Commonwealth and Development Office (FCDO) of the United Kingdom.
It aims to ensure financial stability, protect depositors and establish accountability of bank shareholders.
Asset quality reviews (AQR) and special inspections by international consultants found that the five merging banks—Exim Bank, Global Islami Bank, Social Islami Bank, Union Bank and First Security Islami Bank—have been operating with huge losses and negative net asset values (NAV).
Based on these findings, the Banking Sector Crisis Management Committee (BCMC) decided on September 24 that the shareholders of the troubled banks must bear the burden of losses under the resolution process.
The five banks, together holding deposits of about Tk 2 lakh crore, were declared “non-viable” on Wednesday.
Administrators have been appointed to oversee their merger into a new fully state-owned Islamic bank.
Small depositors will be reimbursed up to Tk 2 lakh each from the central bank’s Deposit Insurance Fund.
Large institutional depositors will later receive Tk 15,000 crore worth of shares following a Tk 20,000 crore initial equity injection by the government.
Bangladesh Bank said an independent professional valuer will be appointed after the merger to determine if any shareholder is entitled to compensation.
If it finds that shareholders suffered more than their fair share of losses, the difference will be reimbursed.
The move marks the beginning of a major consolidation in the Islamic banking sector.
It aims to restore confidence, stabilise the system and free the new entity from years of loan scams and irregularities.
Meanwhile, both the Dhaka Stock Exchange and Chittagong Stock Exchange suspended trading of the five banks’ shares on Thursday.
The suspension deepened panic among investors as DSEX, the key index of the Dhaka Stock Exchange, fell to 4,967 — its lowest in four months — down from above 5,600 in early September.
A group of retail investors demonstrated outside Bangladesh Bank headquarters in Dhaka, demanding Governor Ahsan H Mansur’s resignation.
They accused the central bank of approving misleading financial statements of the banks that guided their investment decisions, leaving them now with worthless shares.
