Paid-up capital wiped out as BB finalises five Islamic banks merger, shareholders get nothing

Bangladesh Bank has completed the merger of five Shariah-based banks by reducing their paid-up capital to zero, a move that has effectively wiped out the entire shareholding of investors and left thousands of small shareholders with no compensation.

Under a Capital Reduction Order issued by the central bank's Bank Resolution Department (BRD), all paid-up capital of the five Islamic banks has been written down and their issued shares fully cancelled.

As a result, shareholders have lost all ownership rights, including voting power, dividend entitlement and the ability to pursue any legal claims.

According to the order, the capital reduction took immediate effect from 5 November 2025. Citing Section 33(2) of the Bank Resolution Ordinance, 2025, Bangladesh Bank said no approval or consent was required from shareholders, creditors, regulators, stock exchanges or any other parties, allowing the decision to be enforced without external clearance.

The order also instructed the appointed administrators to record the capital reduction and share cancellation in all statutory and legal documents.

Relevant filings and notifications are to be made with the Registrar of Joint Stock Companies and Firms (RJSC), the Bangladesh Securities and Exchange Commission (BSEC), Central Depository Bangladesh Limited (CDBL), and the Dhaka and Chattogram stock exchanges.

According to stock exchange data, the combined paid-up capital of the five banks stood at Tk5,820 crore, with a total of 582 crore shares outstanding. Their combined market capitalisation was Tk1,329 crore.

Individually, paid-up capital amounted to Tk1,447.56 crore for Exim Bank, Tk1,208.14 crore for First Security Islami Bank, Tk987.44 crore for Global Islami Bank, Tk1,140.16 crore for Social Islami Bank and Tk1,036.28 crore for Union Bank.

As of 31 October, First Security Islami Bank had the highest public exposure, with 65.05% of its shares held by general investors, while sponsors and directors owned just 5.90%.

In contrast, institutional investors dominated Social Islami Bank, holding 68.54% of shares, compared to 18.97% held by the public.

Union Bank had a majority sponsor holding of 54.49%. Global Islami Bank's ownership was led by institutions at 53.37%, with no foreign investment, while Exim Bank's shareholding structure was relatively balanced, with sponsors owning 32.44% and the public holding 39.31%.

Capital market insiders said small investors had already endured years of losses and were now left completely empty-handed. They pointed out that most affected shareholders had no role in bank management, loan defaults or fund misappropriation, yet had invested in licensed and regulated banks on the assumption of minimum protection.

The risks associated with these banks, they said, had never been clearly communicated to the public.

Market experts described the move as unprecedented in Bangladesh's banking sector, warning that the complete write-down of paid-up capital could further undermine confidence in the stock market, particularly among long-term retail investors who now have no recourse or compensation.

Meanwhile, the newly formed Sammilito Islami Bank PLC has begun operations following the merger of the five banks. Bangladesh Bank granted the final licence to the new entity, which started full banking operations on 2 December 2025.

It has become the largest state-owned Islamic bank in the country, with a stated mandate to protect depositors and restore financial stability.

The merger decision was finalised at a special board meeting of Bangladesh Bank on 30 November, chaired by Governor Ahsan H Mansur. The central bank formally handed over the licence on 1 December.

Sammilito Islami Bank has a paid-up capital of Tk35,000 crore, including Tk20,000 crore from the government and Tk15,000 crore to be raised through the conversion of deposits into shares. Its authorised capital has been set at Tk40,000 crore.

Mohammad Ayub Miah has been appointed chairman, and the bank's head office is located at Sena Kalyan Bhaban in Motijheel, Dhaka. Other board members include Hafiz Ahmed Chowdhury, M Saifullah Panna, Md Kamal Uddin, Md Shahriar Kader Siddiky, Md Rashedul Amin, and Sheikh Farid.

Under current capital market rules, companies usually apply to the BSEC for delisting by buying back free-float shares based on a valuation. A recent example is Beximco Synthetic, which delisted by repurchasing its free-float shares at Tk10 each.

However, market participants said it remains unclear whether such a model is feasible for the merged banks, given their financial condition.