Govt takes charge of merger of 5 banks

The interim government’s advisory council has approved a proposal to merge five troubled private banks. The banks—First Security Islami Bank, Global Islami Bank, Union Bank, EXIM Bank, and Social Islami Bank—will be combined to form a new Shariah-based bank.

Two names have been proposed for the new bank: “United Islamic Bank” and “Combined Islamic Bank.” The bank will be operated on a commercial and professional basis.

The meeting of the advisory council, held Thursday at the Chief Adviser’s Office in Tejgaon, was presided over by Chief Adviser Professor Muhammad Yunus.

After the meeting, Press Secretary Shafiqul Alam announced the approval at a press briefing held at the Foreign Service Academy in Dhaka. He said that as a result of the merger, no employee will lose their job and no depositor will lose their money.

According to the press conference, the new bank will initially have an authorised capital of Tk 400 billion (40,000 crore) and a paid-up capital of Tk 350 billion (35,000 crore.) It will take over all assets and liabilities of the five existing banks. Of the paid-up capital, the government will contribute Tk 200 billion (20,000 crore)—half in cash and the remaining half through the issuance of sukuk bonds.

Sukuk refers to a Shariah-compliant Islamic bond used as an alternative to interest-based bonds. The Arabic term sukuk means a legal document or certificate.

In addition, institutional depositors’ funds amounting to Tk 150 billion will be converted into equity through a bail-in process, under which a portion of depositors’ and creditors’ liabilities are written off and turned into shares. These will later be repaid in accordance with the resolution plan.
Initially, the new bank will be state-owned, but its ownership will gradually be transferred to the private sector.

“We expect the bank to be handed over to the private sector within five years,” said Press Secretary Shafiqul Alam.

Bangladesh Bank expects that government control will help reduce public panic and restore depositor confidence. The central bank is also planning to refund small depositors who have been alarmed. Implementation of this decision may take about a month. Bangladesh Bank Governor Ahsan H Mansur is scheduled to attend the World Bank and IMF Annual Meetings in the United States from 13–18 October, and he is expected to return in early November.

Officials of the Finance Division said that the division will propose the new bank’s name to the Registrar of Joint Stock Companies and Firms (RJSC). Once the name is approved, the company will be formed. The Bangladesh Securities and Exchange Commission (BSEC) will also need to grant permission.

The government will then apply to Bangladesh Bank for final approval of the new bank, including the names of the board of directors and chairman. Although the central bank board has already given preliminary approval, the final notification will be issued once the application is received.

An office for the proposed bank has reportedly been arranged at the Sena Kalyan Bhaban in Dhaka. After the government injects Tk 200 billion in capital, Bangladesh Bank will appoint administrators to the five merging banks, which will then be officially acquired by the new entity. The old bank signboards will also be replaced.

According to the summary presented to the advisory council, the objective is to restore discipline, ensure accountability, and re-establish good governance in the banking sector under a reform initiative undertaken by Bangladesh Bank.

As part of this programme, two internationally reputed consulting firms—KPMG and EI, both based in Sri Lanka—were appointed to assess the real financial condition of the scheduled banks.

The council was informed that the five banks had been receiving liquidity support for over a year, but their financial situation had not improved. Instead, their liquidity crises deepened. Their capital shortfalls, non-performing loans, provisioning gaps, and liquidity shortages had reached such critical levels that they could no longer repay depositors and creditors.

The council was informed that Bangladesh Bank has already conducted a simulation exercise for the formation of the new Shariah-based, state-owned bank. Such exercises test how to respond in emergencies or crisis situations.

Based on this, a 10-year financial and business plan has been prepared for the new bank. A time-bound implementation roadmap is also being developed.

The Financial Institutions division formed a working committee on 8 September for this purpose. The central bank’s board of directors approved the Resolution Plan 2025 in a special meeting on 16 September, and on 24 September, the Banking Sector Crisis Management Council (BCMC) decided that the government would bear the five banks’ accumulated losses.

By 28 September, Bangladesh Bank had reviewed the face value, market value, and net asset value (NAV) of the five banks and found that each had a negative NAV, with massive capital deficits, bad assets, and liquidity crises.

Shafiquzzaman, Managing Director of Social Islami Bank—one of the banks to be merged—told Prothom Alo, “Merging these five banks is a wise step for the greater interest of the banking and financial sector. It will protect the interests of 9 million depositors. All stakeholders should support the implementation of this decision.”