Delisting process of five merged banks yet to start amid procedural ambiguity

Despite the formal merger of five Shariah-based banks into the newly formed Sammilito Islami Bank and the commencement of its operations, the process to delist the five individual banks from the capital market has yet to start.

Regulatory authorities say they have not received any application or instruction to initiate the procedure, leaving thousands of general shareholders in uncertainty.

While the five lenders – First Security Islami Bank, Global Islami Bank, Social Islami Bank, Exim Bank, and Union Bank – have been legally amalgamated into a single institution, the regulatory steps required to remove their individual stocks from the exchanges remain in limbo due to a lack of coordination and procedural precedent, according to analysts.

According to senior officials at the Dhaka Stock Exchange (DSE), the bourse has not yet received any formal communication or application regarding the delisting of the five banks.

A senior DSE officer explained that under current market regulations, the exchange cannot unilaterally delist any company. The process requires explicit approval from the Bangladesh Securities and Exchange Commission (BSEC) before the exchange can take action to remove the scrips from the trading board.

This stance was corroborated by the capital market regulator. A senior officer at the BSEC said that the initiative must come from the issuer companies themselves. "First of all, the issuer firms must apply to the commission to delist from the capital market. However, the commission is yet to receive such an application." 

He added that once an application is submitted, the regulator will determine the delisting method in compliance with relevant securities laws.

The delay appears to stem from confusion regarding decision-making authority. An administrator from one of the five merged banks stated that the appointed administrators do not have the mandate to make decisions regarding delisting, claiming the matter depends entirely on the Bangladesh Bank.

However, the central bank has clarified that it will not intervene directly in the capital market procedures. Arif Hossain Khan, spokesperson and executive director of Bangladesh Bank, told TBS that the five banks are now operating under the umbrella of Sammilito Islami Bank. He emphasised that the responsibility lies with the new entity's leadership.

"The board of Sammilito Islami Bank will decide how to delist the five banks from the capital market. The Bangladesh Bank has no role in the delisting procedure; rather, it can only observe the activities," Khan said.

He further acknowledged the complexity of the situation, noting, "Since this is the first time in the country that listed banks have been merged into a new licensed entity, some confusion is natural. The decisions will be made collaboratively among all stakeholders to avoid any adverse impact."

Although Sammilito Islami Bank has begun its journey with a new licence, it has not yet finalised its corporate structure. According to Bangladesh Bank sources, a scheduled board meeting today (3 December) was postponed as the managing director and company secretary have not yet been appointed.

The merger follows a decisive move by the central bank earlier this month. On 30 November, a special board meeting chaired by Bangladesh Bank Governor Ahsan H Mansur finalised the decision to merge the five troubled lenders into a single new entity. The central bank formally handed over the license for the new bank on 1 December.

The new entity has been established with a paid-up capital of Tk35,000 crore. Of this amount, the government is providing Tk20,000 crore, while the remaining Tk15,000 crore is being raised through the conversion of deposits into shares. The bank's authorised capital has been set at Tk40,000 crore.

Mohammad Ayub Miah has been appointed as the chairman of the new bank, and its head office is located at Sena Kalyan Bhaban in Dhaka's Motijheel. The other board of directors of the bank are Secretary to Legislative and Parliamentary Affair Division Hafiz Ahmed Chowdhury, Secretary of the Chief Adviser's Office M Saifullah Panna, Secretary of the Ministry of Religious Affairs Md Kamal Uddin, Secretary of the Economic Relations Division Md Shahriar Kader Siddiky, Joint Secretary of the Finance Division Md Rashedul Amin and FID's Joint Secretary Sheikh Farid.

Attempts to reach Mohammad Ayub Miah for comments regarding the delisting roadmap were unsuccessful.

Under current capital market rules, issuer firms usually apply to the commission for delisting by offering to buy back free-float shares at a price determined through a valuation process. A recent precedent involves Beximco Synthetic, which delisted from the market by buying back its free-float shares at a face value of Tk10 each. However, given the financial health of the merged banks, it remains unclear if a similar buyback model is feasible.

In early November, the central bank dissolved the boards of the five troubled banks and appointed administrators to facilitate the merger. On 6 November, the stock exchanges suspended trading of their shares following a Bangladesh Bank directive.

The market capitalisation of the five banks currently stands at Tk1,329 crore, with a total of 582 crore shares outstanding. The shareholding structures vary significantly across the five institutions, posing a challenge for a unified delisting strategy.

As of 31 October, First Security Islami Bank had the highest public exposure, with general investors holding 65.05% of its shares, while sponsors and directors held only 5.90%. In contrast, Social Islami Bank is heavily held by institutions, which own 68.54% of the company, with public holding at 18.97%. Union Bank has a majority sponsor holding of 54.49%, while Global Islami Bank has zero foreign investment and a 53.37% institutional holding. Exim Bank's structure is more balanced, with 32.44% held by sponsors and 39.31% by the public.