Four banks agree to BB merger plan, EXIM seeks more time
Central bank officials said the banks in question are currently struggling to return depositors’ money due to various fraud and embezzlement by the previous owners
Highlights:
- FSIB, Global Islami Bank, Union Bank, and Social Islami Bank agree
- EXIM wants to implement its own recovery plan before joining the merger
- Tk35,000cr needed for the merger
- Massive S Alam-linked defaults: FSIB Tk38,000cr, Union Bank Tk28,000cr, Global Islami Tk12,000cr, and Social Islami Tk6,000cr
Four banks have agreed in principle to Bangladesh Bank's merger initiative, while one sought time before joining the proposed consolidation of five Shariah-compliant banks weakened by massive loan scams linked to S Alam Group.
In initial talks with the central bank, First Security Islami Bank, Global Islami Bank, Union Bank, and Social Islami Bank have shown support for the proposal, while EXIM Bank has requested more time before committing.
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A central bank official told TBS, "We are holding meetings with the boards of the affected banks. These meetings serve as a form of hearing to assess the condition of the banks."
According to the central bank's preliminary estimates, creating a single consolidated entity from the five banks would require around Tk35,000 crore. Part of this funding will come from the government, while the rest will be provided as loans from the Deposit Insurance Trust Fund (DITF) – a dedicated account to safeguard depositors from losses in case of a bank failure.
Bangladesh Bank Governor Ahsan H Mansur has already discussed the matter with Finance Adviser Salehuddin Ahmed, and the final approval for fund allocation is expected at a high-level government policy meeting once the adviser returns to Dhaka next week.
Central bank officials said the banks in question are currently struggling to return depositors' money due to various fraud and embezzlement by the previous owners.
Social Islami Bank chairman leaves merger decision to cenbank, director opposes move
Under the merger plan, the consolidated bank will initially operate as a state-owned "bridge bank". Once it reaches a profitable stage, it is expected to be returned to the private sector.
After a meeting with Bangladesh Bank officials on Tuesday, First Security Islami Bank's (FSIB) Chairman Mohammad Abdul Mannan said the bank had no objection to the central bank's merger decision as the safety of depositors would be ensured.
He disclosed that S Alam Group had withdrawn Tk38,000 crore from FSIB as loans, which caused the present crisis. He also revealed that S Alam Group had taken Tk28,000 crore from Union Bank under various names, but those borrowers could no longer be traced, leading to a liquidity crisis.
After FSIB, Union Bank expressed its consent to the merger initiative. Its chairman, M Farid Uddin, said after the meeting, "Depositors are coming to withdraw their money, but we are unable to pay them. So, the sooner a decision is made regarding these banks, the better. This could involve a merger, restructuring, or another solution."
Bangladesh Bank Governor Ahsan H Mansur joined the meeting virtually, along with four deputy governors and senior officials.
Global Islami Bank has also agreed to the merger plan. Its chairman, Mohammad Nurul Amin, disclosed that the bank's loan portfolio is Tk14,000 crore, of which Tk12,000 crore was borrowed by S Alam Group through various entities. Most of these loans have defaulted, with collateral covering less than 25% of the exposure.
Social Islami Bank agreed to the merger plan as well. The bank's chairman, Mohammad Sadiqul Islam, said, "In the meeting, we shared our bank's financial status, and the Bangladesh Bank presented some data. We agree in principle."
He added, "S Alam has taken around Tk6,000 crore from our bank, which is not very large compared to other banks. About 35% of this is collateralised. Around 60% of our non-performing loans can be rescheduled."
However, the bank's Director Major (retd) Md Rezaul Haque opposed the merger initiative, saying, "Our bank is not in a bad state. Why should we merge? I urged the chairman not to go for a merger."
EXIM Bank has stated that it is not ready to be part of the process just yet.
Nazrul Islam Swapan, chairman of EXIM Bank, said after the meeting, "We have presented a roadmap. The Bangladesh Bank has asked us to make it clearer and more detailed. We will revise it and present it again in the next meeting."
The bank informed that it wants to first implement its own recovery plan and would need more time before considering a merger.
