No scope to protect investors’ interests in merging five banks: BB

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Dhaka, Nov 6 - Bangladesh Bank has said that under the Bank Resolution Ordinance 2025, there is currently no scope to consider the protection of investors’ or shareholders’ interests in the ongoing merger of five Shariah-based banks.

In a statement issued on Thursday night, the central bank clarified that the ordinance does not provide any provision to safeguard general investors or shareholders during the merger process.

However, the government may consider compensating small investors to protect their interests.

The merger of the five Islamic banks — First Security Islami Bank, Global Islami Bank, Union Bank, EXIM Bank, and Social Islami Bank — has sparked widespread debate and concern among stock market investors.

Earlier, Bangladesh Bank Governor Ahsan H Mansur said the shares of the troubled banks have become worthless, with the value of Tk 10 face-value shares turning negative, leaving investors with nothing to recover.

According to the central bank, the Bank Resolution Ordinance 2025 has been formulated in line with international best practices and with technical support and feedback from the IMF, World Bank, and the UK’s FCDO.

The ordinance clearly defines the rights of depositors, shareholders, and other creditors of the banks under its jurisdiction.

As per four provisions of the ordinance, Bangladesh Bank may impose losses on shareholders, responsible persons, Additional Tier-1 and Tier-2 capital holders (except subordinated debt holders) of any scheduled bank placed under resolution.

Besides, Section 40 of the ordinance allows for compensation to shareholders if they suffer losses greater than what they would have incurred under a liquidation scenario.

Such compensation will be determined based on an independent valuation appointed by Bangladesh Bank after the resolution process is completed.

The central bank said analyses of data from the Asset Quality Review (AQR) and special inspections conducted by international consulting firms show that the banks are facing massive losses with negative net asset values.

In a meeting of the Banking Sector Crisis Management Committee held at Bangladesh Bank in September, it was decided that the shareholders of the five troubled banks would have to bear the burden of the losses during the resolution process.

Given this context, the central bank reiterated that there is currently no scope to consider the protection of general investors or shareholders in the merger process, though the government may explore compensation measures for small investors. - UNB