Anis A Khan calls for transparency, governance reform in bank merger

Anis A Khan, former chairman of the Association of Bankers, Bangladesh (ABB) and currently managing partner of AAZ & Partners, has offered measured reflections on the proposed merger of five Islamic banks, calling for transparency and deep governance reform for it to be successful.

Speaking with The Business Standard, Anis described the merger of the five banks – First Security Islami Bank, Global Islami Bank, Union Bank, Social Islami Bank and EXIM Bank – as a bold regulatory intervention, but said its success will depend on more than financial consolidation.

"Public funds, especially in the current fiscal climate, must be deployed with utmost transparency and accountability. The injection of Tk20,000 crore in taxpayer money raises legitimate concerns about moral hazard and governance integrity."

He continued, "Revival will require more than capital; it calls for deep governance reform and a credible break from past practices. Safeguards must be in place to ensure that the new board is free from undue political or business influence.

"Restoring public trust in Islamic banking will demand a clear break from past practices and a demonstrable commitment to ethical stewardship."

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Key drivers

Anis highlighted three key drivers behind the merger: systemic risk mitigation, asset quality and regulatory overhaul.

He said the five banks are facing liquidity issues and depositor panic due to non-performing loans and governance failures.

"Preliminary estimates suggest a capital requirement of around Tk35,000 crore to consolidate the banks, with support from the government and the Deposit Insurance Trust Fund, which will ensure the safety of depositors' funds during the merger process."

He noted that the merger is enabled by the Bank Resolution Ordinance 2025, which gives Bangladesh Bank expanded powers to restructure distressed institutions.

"This regulatory overhaul includes measures such as regular audits, public disclosure of financial statements and strict enforcement of corporate governance standards to enhance transparency, strengthen governance and prevent future crises in the banking sector."

Implications

Anis also outlined the strategic implications of the merger: the new entity will become Bangladesh's largest lender, with assets worth Tk2.2 lakh crore, potentially reshaping the competitive landscape in Islamic banking.

Initially, he said, the merged bank will operate as a state-owned "bridge bank" to ensure uninterrupted operations, with plans to return to private ownership once stabilised.

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He stressed that the merger carries different issues for various stakeholders. Anis said depositors' confidence will take time to rebuild, while employees are expected to retain jobs despite potential branch reorganisations.

Crucially, the existing boards will be restructured, he said, adding that new leadership will be appointed under central bank supervision.

Meanwhile, he warned that injecting Tk20,000 crore of public funds into banks plagued by mismanagement risks normalising impunity.

"Unless the new board is insulated from political and business capture, the merger may consolidate influence rather than correct it."

Anis went on to say that in a tight budgetary environment, allocating Tk20,000 crore raises serious questions about prioritisation. "Can the state afford this bailout without compromising essential public services?"

"The merger must be more than a technical fix; it needs to restore credibility, enforce transparency and demonstrate that reform is factual, not rhetorical," he added.