Five-Bank Merger: Shareholders Face Losses

The news details the aftermath of the Bangladesh Bank (BB) governor's announcement of the merger of five troubled banks, confirming that the share value of these banks has become zero. This has sparked protests from general shareholders.

Bangladesh Bank issued a press release on November 6, stating that based on the Bank Resolution Ordinance 2025 and a decision by the Banking Sector Crisis Management Committee (BCMC), there is currently "no scope to preserve the interests of general investors or shareholders" in the merger. This decision is based on Asset Quality Review (AQR) data showing the banks have massive losses and negative Net Asset Value (NAV).

Despite the general lack of protection, the central bank indicated that the government may consider compensating small investors or shareholders "to protect them."

The Bank Resolution Ordinance states that shareholders are entitled to compensation only if their losses are greater than what they would have faced had the investment been defunct. Any such compensation will be determined by independent professional valuers appointed by BB after the resolution process is complete.

The central bank emphasized that the Bank Resolution Ordinance was formulated with technical assistance from the IMF, World Bank, and FCDO, aligning with international best practices. The BB officially declared the five banks "non-viable" and dissolved their boards. Administrators have been appointed to operate the banks under the new Ordinance.

Trading of shares of the five Islamic banks on the Dhaka Stock Exchange (DSE) was suspended immediately until further notice. Bangladesh Bank assured that the full merger process might take two years, but small depositors (up to Tk2 lakh) will receive their funds soon, with the process expected to start within a month from the Deposit Protection Fund. Large depositors will be reimbursed gradually.

The five merged banks will form a new entity called Combined Islami Bank, with a total capital base of Tk35,000 crore (Tk20,000 crore from the government and Tk15,000 crore in shares issued to depositors).