Bangladesh Bank has taken over the liabilities and responsibilities of five Shariah-based banks that are being merged under government supervision. The boards of all five banks have been dissolved. With the appointment of administrators, the terms of the banks’ managing directors have ended. In addition to the administrators, the central bank has assigned four officials to each bank to assist in management. Until the merger process is completed, the banks will be operated by Bangladesh Bank officials.
To explain the overall situation and the merger process of the financially weak banks, the central bank held a press briefing on November 5 afternoon, where Governor Dr. Ahsan H Mansur said, “The merged institution will become the most financially strong bank in the country. The merged bank will be under full government ownership. So there is no reason for depositors or employees to panic. The merger process may take one to two years to complete.”
All five Shariah-based banks are listed on the stock market, with shares held by both institutional and individual investors. Addressing concerns of affected shareholders, the governor said, “The losses in these banks are so severe that the value of each BDT 10 share has turned negative by about BDT 350 to 420. According to international practice, shareholders will receive nothing. Their shares are now worth zero. We are not asking them to pay anything further; that’s the only consolation. However, those who invested in bonds will receive cash or shares.”
The five banks being merged are Exim Bank, First Security Islami Bank, Global Islami Bank, Social Islami Bank, and Union Bank. Except for Exim Bank, the other four were controlled by the S Alam Group. The interim government approved the merger last month, paving the way for the creation of a new institution named “Sammlito Islami Bank PLC.”
To formalize the merger process, Bangladesh Bank appointed administrators to all five banks on November 5. On the morning of that day, the chairmen, directors, and managing directors of the five banks were summoned to the Bangladesh Bank. Mohammad Nurul Amin, chairman of Global Islami Bank, who attended the meeting, told Bonik Barta, “In the post-mass uprising period, the boards of these five banks were restructured. The governor thanked those of us who had been serving until now. At the same time, he informed us about the appointment of administrators. After returning from the meeting, we received the official letters of appointment of the administrators. Following the central bank’s decision, none of the five banks will have an active board from now on. Two of these banks had full-time managing directors, while the other three had acting MDs. With the appointment of administrators, the full-time MDs will no longer hold their positions, and the acting ones will remain as bank officials. This is what we understood from the central bank’s instructions.”
Another chairman who attended the meeting said, “We asked the governor about the situation of ordinary shareholders. He said the central bank would not assume any responsibility for shareholders, as the net asset value per share of these banks is deeply negative. The directors or shareholders responsible for the banks’ losses will receive nothing. However, if the government or the Securities and Exchange Commission decides to offer compensation to general shareholders, Bangladesh Bank would welcome that.”
The appointed administrators are: Sawkatul Alam, Executive Director of Bangladesh Bank, for Exim Bank; Md Badiuzzaman Dider, Executive Director, for First Security Islami Bank; Md Salah Uddin, Executive Director, for Social Islami Bank; Md Maksuduzzaman, Director, for Global Islami Bank; and Mohammad Abul Hashem, Director, for Union Bank. Alongside the administrators, four additional central bank officials have been assigned to each bank. Their first task will be to provide all necessary data for the merger process. Central bank officials will coordinate all merger-related information at the newly established office for the five-bank consolidation located in Sena Kalyan Bhaban.
Regarding the operation of the five merging banks, the governor said, “Although administrators have been appointed, banking operations will continue as usual. At the same time, the merger process will move forward. Each depositor can now withdraw up to BDT 200,000 if they wish. However, since the merged bank will be state-owned, there is no need for depositors to withdraw money unless necessary. Large depositors will be informed later through an official gazette when they may withdraw their funds.” He added that no bank in the world could survive if all depositors rushed to withdraw money at once.
According to financial statements and audit data from Bangladesh Bank, the combined assets and liabilities of the five merging Shariah-based banks stood at over BDT 2.29 trillion as of December 31, 2024. This figure includes all forms of capital, distributed loans, and other assets. The banks together held deposits of BDT 1.53 trillion from 7.5 million depositors, against which the total disbursed loans (investments) amounted to BDT 1.92 trillion. Of that, BDT 1.47 trillion was classified as defaulted loans, which is around 76 percent of the total disbursed amount.
Across the country, the five banks operate 761 branches, 698 sub-branches, 511 agent banking outlets, and 975 ATMs. Among them, Union Bank has the highest rate of defaulted loans at 98 percent, followed by First Security Islami Bank at 97 percent, Global Islami Bank at 95 percent, Social Islami Bank at 62.3 percent, and Exim Bank at 48.2 percent. These banks together face a capital shortfall exceeding BDT 1 trillion against their non-performing loans. A total of 18,081 employees work in the five banks, which collectively spent BDT 19.77 billion on salaries and allowances in 2024.
Under the government’s plan, the authorized capital of the new merged bank will be BDT 400 billion, with a paid-up capital of BDT 350 billion. Of this, the government will contribute BDT 200 billion; half in cash and the remaining BDT 100 billion through the issuance of Sukuk bonds. Institutional depositors’ holdings worth BDT 150 billion will be converted into shares of the new bank through a bail-in process. Under this process, a portion of customer and creditor claims will also be converted into equity, to be repaid later as per the proposed plan. The Finance Division will supply the capital for the new state-owned bank. The current fiscal year’s budget has already allocated BDT 200 billion for the bank merger. Officials said the capital will be released after the Financial Institutions Division (FID) completes the formal process of establishing the new bank.
Meanwhile, on September 23, the Bangladesh Securities and Exchange Commission (BSEC) sent a letter to the Bangladesh Bank regarding the protection of shareholders’ interests in the five banks. The letter stated that general shareholders should not be held responsible for the banks’ current financial distress. To safeguard their interests, the BSEC advised several measures, including assessing the banks’ balance sheets, licenses, branch networks, customer base, human resources, service systems, and brand value to determine sale value under Section 77 of the Bank Resolution Ordinance 2025. Based on these evaluations, the commission said general investors’ interests should be determined, excluding those responsible for the banks’ losses.
The BSEC also suggested assessing the collateral held against defaulted loans and seizing the movable and immovable assets of those liable before determining the value of ordinary investors’ interests. It proposed that, excluding the shares held by responsible individuals, the higher of either the market value or the face value of shares held by general shareholders should be treated as their minimum equity value when determining the merger ratio. The letter also requested that the banks not be delisted from the stock exchanges until the value ratio for general investors or the merged value of their shares is determined and publicly announced.
When asked about the matter, BSEC Director and Spokesperson Md Abul Kalam told Bonik Barta, “We have not yet received any formal decision from Bangladesh Bank regarding the shareholders of the five banks. However, we have taken note of the press conference on this issue. Once Bangladesh Bank formally communicates its decision, the commission will take the next steps concerning shareholder interests.”