BB to outline merger process for five ailing Islamic banks

Bangladesh Bank will send a letter to the government soon, detailing how to merge five troubled Islamic banks in what officials say is the formal start of implementing the sector's long-discussed consolidation plan.

The letter will specify the funds required for the process and the fate of the banks' shares, according to a decision taken at a meeting at the central bank yesterday.

At a press conference, central bank Governor Ahsan H Mansur said discussions on mergers were ongoing and an official announcement would be made in due course. He reassured depositors there was no cause for panic, as all funds would be returned.

Under the newly enacted Bank Resolution Ordinance 2025, the BB has initially decided to merge Social Islami Bank, Global Islami Bank, First Security Islami Bank, Union Bank and EXIM Bank.

Four of the banks' chairmen attended the meeting, chaired by Governor Mansur, along with Deputy Governor Md Kabir Ahmed and other senior BB officials. Those present were Mohammad Abdul Mannan of First Security Islami Bank, Md Fariduddin Ahmed of Union Bank, Mohammed Nurul Amin of Global Islami Bank, and M Sadiqul Islam of Social Islami Bank.

However, EXIM Bank Chairman Md Nazrul Islam Swapan claimed he was not invited. "The financial health of the bank is better than other weak banks. That's why we are not interested in the merger," he told The Daily Star. "We requested the central bank in different ways to exclude us, but it did not accept our plea."

Contacted, BB Executive Director and spokesperson Areif Hossain Khan said the meeting was part of the merger initiative and aimed at expediting the process.

A chairman who attended the meeting, requesting anonymity, said the government would make an official announcement within days and send letters to the banks.

Union Bank Chairman Fariduddin said the BB governor sought their views and assured them the move would be done legally.

BB officials said the central bank decided to set up an office at Sena Kalyan Bhaban in Motijheel to oversee the process.

The five banks again requested liquidity support from the BB, but the regulator refused, saying no new funds would be provided during the merger.

The central bank decided in June to merge the five troubled lenders due to their weak financial health revealed by a forensic audit conducted by global audit firms KPMG and Ernst & Young. The asset quality review found their non-performing loans were four times higher than previously reported.

The banks will be placed under temporary government control once the merger begins.

The move is part of the interim government's wider effort to stabilise the banking sector, for which it passed the Bank Resolution Ordinance giving the BB expanded powers to resolve distressed financial institutions.