Hurried bank merger raises questions

The hurried initiative of merging banks may not bring about the desired outcome, said analysts at a webinar.

The observation comes as Exim Bank, an Islami Shariah-based bank, is going to acquire the trouble-ridden Padma Bank. Both banks announced their decision to merge nearly a week ago. 

The discussants said the decision was taken swiftly without enough preparation. Good banks and depositors are concerned over the move to merge banks, they said as they shed light on the impact of mergers on the distressed banking sector.

The Forum for Bangladesh Studies organised the webinar today.

At the event, Fahmida Khatun, executive director of the Centre for Policy Dialogue, said there are questions about why the authorities have taken the merger decision quickly when the comprehensive guidelines and regulations on mergers are yet prepared.

Both Padma and Exim Bank are weak as per the central bank report on banks' health index. So, it is very difficult to get any positive result by merging two weak banks, she said.

However, Zia Hasan, a researcher on development and economics, said the merger of two weak banks is better than the merger of a weak bank with a stronger bank. The key question is who will take the burden of bad assets of weak banks, he said. 

Ultimately, the taxpayers will have to bear the cost of the bad assets of weak and troubled banks, he added.