Islamic banks to be merged into two big entities: BB governor

Bangladesh Bank governor Ahsan H Mansur has announced that the Islamic banks will be merged to form two large Islamic banks as part of sweeping reforms in the financial sector.

He made the announcement while speaking as the chief guest at the inaugural session of the annual banking conference on Wednesday, hosted by the Bangladesh Institute of Bank Management (BIBM).

The governor underscored the need for sustained political support to reform the banking sector. “Despite political changeovers, these reforms must continue, and the autonomy of the central bank must be maintained,” he said.

Regarding money laundering, the governor said they are working with foreign agencies to reclaim the laundered funds. “Both legal and ethical measures are required. Life will be made difficult for those who laundered money, so that nobody follows suit in the future. Here, cooperation from all stakeholders is crucial.”

He noted the initiatives taken to reform the finance sector, including changes in boards of the 13 banks plagued with irregularities and revision in the Bank Company Act.

“In the interest of depositors, changes were made in boards of the banks marred with irregularities. Changes were initially done in 11 banks, and later in two more banks. Meanwhile, another bank carried out the change by itself. Changes are being made in the Bank Company Act, with determination of qualifications for those who will serve on boards, and who will serve as independent director,” he detailed.

He described the Bangladesh Bank as a significant reason for the problems prevailing in the banking sector and noted that it is being strengthened.

“The central bank is being strengthened. There are various pressures on the central bank, along with the issue of dual administration in the banking sector. Works are underway to strengthen its autonomy and monitoring, so that it becomes an effective entity,” he said, adding that the central bank is unwilling to interfere in the banks’ regular activities.

The governor announced that the boards and management bodies will be monitored closely to ensure their proper functioning. The reporting system in the central bank will be completely automated, while all submissions will be done online.

Over the Islamic banks, he said, “The Islamic banks will have a completely new appearance. There is one large and several smaller Islamic banks, with some struggling with problems. These banks will be merged to create two big Islamic banks. New laws and regulatory systems will be introduced for the Islamic banks, in line with global best practices.”

The governor warned that most of the troubled banks are suffering from capital shortage and in poor financial health. “It will take several years to restore these institutions. These reforms require support during political changeover.”