5-bank merger: Govt may consider compensation for small investors, says cenbank
According to the Bank Resolution Ordinance, any such compensation will be determined based on an assessment conducted by independent professional valuers appointed by Bangladesh Bank after the completion of the resolution process
The Bangladesh Bank has said there is currently no scope to protect general investors or shareholders from losses caused by the merger of five troubled banks, though the government may consider compensating small investors "to protect them".
In a press release issued today (6 November), the central bank stated that under the Bank Resolution Ordinance, if shareholders suffer losses greater than what they would have faced had the investment been defunct, they are entitled to compensation for the additional loss.
According to the ordinance, any such compensation will be determined based on an assessment conducted by independent professional valuers appointed by Bangladesh Bank after the completion of the resolution process.
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On Wednesday, the Bangladesh Bank governor announced the merger of the five banks and revealed that the share value of these banks had become zero. Following the announcement, general shareholders began protesting the decision, demanding the governor's resignation and announcing plans to lay siege to the central bank. Shortly after, the Bangladesh Bank issued the press release..
The central bank said the Bank Resolution Ordinance was formulated in alignment with international best practices and with technical assistance and guidance from the IMF, World Bank, and FCDO. The ordinance clearly defines the rights of depositors, shareholders, and other creditors of banks brought under resolution.
The release stated, "Analysis of data from the Asset Quality Review (AQR) and special inspections conducted by international consulting firms revealed that these banks are operating with massive losses and have negative Net Asset Value (NAV)."
In this context, the Banking Sector Crisis Management Committee (BCMC), in its meeting held on 24 September at Bangladesh Bank, decided that the shareholders of the five distressed banks must bear the losses during the resolution process," it added.
"In light of the relevant provisions of the Bank Resolution Ordinance 2025 and the BCMC decision, there is currently no scope to preserve the interests of general investors or shareholders in the merger of these five banks. However, to protect small investors or shareholders, the government may consider compensating them," the central bank said.
Bangladesh Bank officially notified the boards of the five banks yesterday, declaring them "non-viable" under the Bank Company Act framework.
Although the full merger process may take around two years to complete, the central bank assured that small depositors (up to Tk2 lakh) will be able to withdraw their funds soon, with the process expected to begin within a month. Large depositors will be reimbursed gradually.
Today, trading of shares of the five Islamic banks undergoing merger was suspended.
The Dhaka Stock Exchange (DSE) issued five separate notices announcing the suspension, effective immediately until further notice.
Additionally, the boards of the five banks have been dissolved. Bangladesh Bank, through issuing letters, informed that the banks will now operate under the Bank Resolution Ordinance. Administrators have been appointed, and their roles have been defined by the central bank.
After the administrators take office, in the first phase, each depositor will receive up to Tk2 lakh from the Deposit Protection Fund.
According to Bangladesh Bank data, the five merged banks will form a new entity called Combined Islami Bank, with a total capital base of Tk35,000 crore – Tk20,000 crore from the government and Tk15,000 crore in the form of shares issued to depositors.
Of the five banks, four were owned by S Alam Group, while one was controlled by Nazrul Islam Mazumder, during the tenure of the Awami League government.
