Concerns over forced mergers of banks now over: BAB chairman
In July 2023, the Bangladesh Bank through the amended Bank Company Act 2023 was given the authority to initiate forced mergers between banks if the board of directors and management were found to be involved in activities that went against the depositors' interest
The concerns surrounding forced merger of banks, which began in 2023, have been dispelled as any such move will only aim to make the banks stronger, Bangladesh Association of Banks (BAB) Chairman Nazrul Islam Mazumder said today (4 March).
"The [Bangladesh Bank] governor answered our queries well. We understand that no one will be harmed by this. Weak banks will become stronger and good banks will become even better," he told reporters after meeting with the central bank Governor Abdur Rauf Talukder.
In July 2023, the Bangladesh Bank through the amended Bank Company Act 2023 was given the authority to initiate forced mergers between banks if the board of directors and management were found to be involved in activities that went against the depositors' interest.
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Following the meeting at the central bank's headquarters, Mazumder, also the chairman of Exim Bank, said, "When I read about this in the newspaper that banks will be merged, we were a bit concerned. We just had a detailed talk with the governor today. He explained to us, so now the concerns have been addressed.
"Considering various examples of banks merging in different countries, we will accept the move in national interest," he said, adding, "If the government wants, then we are bound to accept any decision in national interest.
"We will accept the decision of the central bank in the national interest."
After the meeting, Executive Director and Spokesperson of the Bangladesh Bank Mezbaul Haque said, "We decided to merge banks for the wellbeing of the banking sector if needed. After reviewing the overall issue, we will develop a policy..."
He also said it may appear that no banks need to be merged.
There is a Prompt Corrective Action (PCA) policy formulated to identify weak banks.
"We will be able to identify weak banks by March next year. After that, a decision will be taken as to which banks need to be merged. Then the process will start in the light of the policies made considering the overall issues," he added.
The central bank spokesperson further said, "We have before us examples from different countries of the world…In most cases, banks were merged through the owners' own initiative. In some cases, the regulatory body decided. We also want the owners to decide. We will decide if the need arises."
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.
