BB can now initiate forced merger of banks

Highlights:

• Newly amended Bank Company Act 2023 vested the central bank with the power 
• The central bank will also have the authority to reconstruct board of state-owned banks and inspect bank transactions of public organisations
• Previously, the regulator could facilitate a merger only for willing banks

From now on, the Bangladesh Bank will be able to initiate forced mergers of any bank if the board of directors and management are found to be involved in activities that go against the depositors' interest.

The banking regulator has been vested with the power in the newly amended Bank Company Act 2023, according to a gazette notification published by the central bank on Monday.

In the amended act, the central bank has also been endowed with the authority to reconstruct the board of state-owned banks and inspect bank transactions of public organisations.

Besides, any subsidiaries and other organisations formed with bank money have been brought under the direct control and monitoring power of Bangladesh Bank, according to the published gazette.

The amended Bank Company Act states that the central bank will be able to take multiple measures to consolidate or reorganise any banking company if the regulator finds that the banking company failed to implement the recovery action plan.

The central bank can also take similar measures if the chairman, director, chief executive or senior management officer of a banking company is found to be involved in activities deemed harmful to the organisation or its depositors.

Before this, the regulator could facilitate a merger only for the willing banks.

Meanwhile, in the amended Bank Company Act, the Bangladesh Bank has been given special powers to collect bank information of any government agencies or any employees working under other regulatory bodies.

Moreover, the amendments also brought bank subsidiaries under the direct control of the Bangladesh Bank. At present, such subsidiaries are regulated by the Bangladesh Securities and Exchange Commission (BSEC).

"Bangladesh Bank may at any time, by one or more of its officers, inspect the documents and accounts of any branches and subsidiaries of a bank-company located inside or outside Bangladesh bank-company registered in Bangladesh," the amended act dictates.

Meanwhile, for bank-company registered outside Bangladesh, the central bank will be able to inspect the books and accounts of all its branches located in Bangladesh.