Bangladesh Bank has directed that the shares of five Islamic banks currently undergoing a merger be written down to zero. The decision has been taken under the Bank Resolution Ordinance, as the actual value of the banks’ assets has turned negative.
The central bank sent letters to the banks on Monday in this regard. As a result, the paid-up capital of the five banks will be reduced to zero, and the shares held by all shareholders—including S Alam Group, Nassa Group, and others—will also become worthless, according to Bangladesh Bank sources.
The five banks set to be merged are First Security Islami Bank, Social Islami Bank, Union Bank, Global Islami Bank, and EXIM Bank. Due to a severe liquidity crisis, these banks are struggling to pay staff salaries, while customers are facing difficulties in withdrawing deposits.
Final approval has already been given for the formation of a new bank named Combined Islami Bank PLC, which will acquire the five troubled Islamic banks.
Among the five, EXIM Bank was owned by Nazrul Islam Mazumder, former chairman of the Bangladesh Association of Banks (BAB). The remaining four were controlled by Chattogram-based S Alam Group, led by controversial businessman Saiful Alam.
Both individuals were known to be close to ousted prime minister Sheikh Hasina, and they held shares in these banks both directly and through proxy ownership.
Sources said the directive to write down the shares was issued under Section 33 of the Bank Resolution Ordinance, which allows for the reduction or conversion of the capital and eligible liabilities of a scheduled bank under resolution in order to achieve the objectives of the resolution process.
Bangladesh Bank officials said this is primarily an accounting measure; however, it effectively renders the shareholders’ stakes worthless, leaving them with no remaining claims.
Meanwhile, the government wants to take action against those responsible for pushing the five banks into distress. The Financial Institutions Division recently sent a letter to Bangladesh Bank, calling for the identification of individuals responsible for the crisis.
The letter also instructed authorities to initiate legal action against owners, board members, relevant officials, and defaulting borrowers responsible for mismanagement. It further emphasised the recovery of non-performing loans, investments, and assets of the five banks.
The proposed Combined Islami Bank will have a paid-up capital of Tk 350 billion, of which Tk 200 billion will be provided by the government. The remaining Tk 150 billion will come from converting depositors’ funds into shares.