Govt can take over banks, financial institutions temporarily, ordinance issued

An ordinance was issued allowing the government and the Bangladesh Bank to take over any scheduled bank including Islamic banks, and financial institutions temporarily. Bangladesh Bank can issue orders on the handover of bank shares. However, any state-owned company must be the receiver of the shares.

The 67-page Bank Resolution Ordinance 2025 was published on Friday, 9 May, following the approval of the advisor council on 17 April.

The ordinance states, if any bank's beneficiary owner directly or indirectly uses the bank's assets or funds for their own interest and fraudulently uses them for the interest of others, Bangladesh Bank can decide on the resolution of that bank. Resolution means the power to take any action against the bank concerned.

Bangladesh Bank can appoint a temporary administrator in any weak bank, citing specific reasons. The bank concerned can increase capital through the existing shareholders or new shareholders. The ordinance also allows the transfer of the banks’ shares, assets, and liabilities to a third party.

The ordinance further states, if Bangladesh Bank thinks any bank is no longer functional or has no possibility to be functional, has gone bankrupt or is on the verge of bankruptcy, cannot pay depositors' money or a situation has arisen of not paying, then the central bank can decide anything for the betterment of such bank. Bangladesh Bank will now form a separate division, according to the ordinance.

The ordinance also allows the opportunity to establish one or more bridge banks to continue important activities and effective management of the bank concerned. Later, those can also be sold to a third party. Bangladesh Bank can suspend or prohibit all kinds of business operation of any weak bank. A bridge bank is the bank formed by the central bank to manage a weak or bankrupted bank temporarily.

Bank owners’ organisation Bangladesh Association of Banks (BAB) chairman Abdul Hai Sarkar told Prothom Alo over mobile phone on Sunday BAB will analyse the ordinance and then will give reactions.

He said it would not be right to measure all private banks equally since all banks are operating well except for a few ones. There is experience of managing banks by independent directors through changing chairman, but nothing good happened. Monitoring should increase more on state-owned banks with many branches than private banks. The outline of the bridge bank that the ordinance mentions is not yet clear. The first task to bring change in the banking sector will be to restore confidence among depositors, customers, and shareholders. Whether this task is being carried out becomes the big issue, he added.

Besides, the ordinance also states about the formation of Bank Sector Crisis Management Council, a seven-member inter-institutional body. Though the advisory council recommended the formation of a six-member body, later one more member was increased. This council will formulae crisis management strategy and emergency alternative plan.

Led by the governor of Bangladesh Bank, finance secretary, secretary of Financial Institutions Division, chairman of Bangladesh Securities and Exchange Commission (BSEC), secretary to the Ministry of Legislative and Parliamentary Affairs, deputy governor with responsibility of resolution, and another deputy governor nominated by the governor will be members of the council, which will hold a meeting in every three months.

The ordinance says, if any bank’s licence is cancelled, Bangladesh Bank will appeal to the court for its liquidation. The court will appoint a liquidator nominated by Bangladesh Bank. No interest or any other charge will be applicable on the bank’s liabilities once the liquidation order comes to effect.

Again, any bank can go into the process of liquidation on its own, but cannot close operations without the permission from Bangladesh Bank. Deposits’ money and other liabilities for the previous two months must be paid within seven working days of the decision to withdraw license comes to effect.

The ordinance states if any bank fails and loss occurs to the bank due to the actions, inactions, and decisions of any individuals, they will be personally liable for that. Anyone violating the rules issued under the ordinance will face a fine of Tk 5 million. If rules are violated, an additional fine of Tk 5,000 per day will have to be paid for delay.