Banks can merge voluntarily till December: Cenbank

Banks can merge voluntarily until December this year, else the central bank will take the decisions for mergers based on performance, Bangladesh Bank Executive Director and spokesperson Md Mezbaul Haque said today (12 March).

"By March next year, a policy will be formulated regarding the method and process of bank merger following international practice," Mezbaul told reporters at a press conference in Dhaka. 

The spokesperson said the health of banks will be checked by good audit institutions before forced mergers are underway. 

"When banks are merged, it will be done in a proper and transparent process. A merger shall ensure that good banks are not weakened and weak banks become better."

Referring to the red, yellow and green listing of banks published in the media recently, Mezbaul said, "This is not a correct method of looking at the health of banks. Different departments of Bangladesh Bank list banks at different periods. This list is conceptual. 

"The only component of looking at the health of a bank is the audited financial report, which is viewed through the CAMELS method."

Earlier this month, at a meeting with the leaders of Bangladesh Association of Banks, BB Governor Abdur Rouf Talukder shared the central bank's plans to go for forced merger of at least 10 banks by January next year as part of its road map to reduce default loans and ensure corporate governance in the banking sector.

According to a meeting source, the governor instructed bank owners to take preparation for the merger and choose which bank they prefer to merge with. 

Meanwhile, an internal report of Bangladesh Bank identified 38 banks, including six state-owned banks, as weak lenders out of the 54 analysed.

According to the report, more than two-thirds of the banks in the country are now weak. The banks in the "Red Zone" are the worst or poor, the banks in the "Yellow Zone" are weak, and the banks in the "Green Zone" are in good condition.

Of the 54 banks, 12 are in critical condition, of which nine have already moved to the red zone. The other three out of 29 banks in the yellow zone are very close to the red zone.

On the other hand, only 16 banks, including eight local ones, have found a place in the green zone.

This report has been prepared based on data from 54 banks for the past six semi-annual periods, spanning December 2020 to June 2023.