The Bangladesh Securities and Exchange Commission (BSEC) has written to Bangladesh Bank, urging it to take immediate measures to protect the rights and interests of general investors during the government’s planned merger of five financially strained private banks.

The interim government has finalised its decision to merge First Security Islami, Global Islami, Union, Social Islami and EXIM Bank, all of which are facing severe liquidity pressures. While full protection has been guaranteed for depositors, no clear policy has yet been announced regarding the fate of general investors in these publicly listed institutions.

BSEC Director and spokesperson Abul Kalam confirmed the move to reporters, saying, “We have requested the Governor of Bangladesh Bank to ensure the rights of general shareholders during the merger of the five private banks. All legal rights entitled to a general shareholder must be ensured.”

In its letter to the central bank, the BSEC stressed that general investors should not be held accountable for the current financial distress of the merging banks. The Commission also outlined four specific recommendations aimed at safeguarding shareholder value throughout the consolidation process.

Fair valuation – The BSEC urged that asset valuation go beyond the figures reported on balance sheets to include other crucial elements such as banking licences, branch networks, client bases, human resources, service delivery systems and brand value.

These factors, it said, should be incorporated to determine each bank’s fair overall value and ensure that general investors receive an equitable assessment of their holdings.

Collateral and recoverable assets – The regulator recommended that collateral held against bank loans, as well as attachable movable and immovable properties belonging to individuals responsible for the institutions’ current state, be factored into the valuation. Recoverable amounts from such assets, it said, should be counted when determining the fair value of general investors’ stakes.

Share conversion ratio – The BSEC advised that shares held by persons identified under Section 77 of the forthcoming Bank Resolution Ordinance 2025 be excluded from any merger ratio calculations. Instead, the ratio should be determined on the basis of the minimum fair value of shares held by ordinary investors, to uphold fairness and protect their rights.

Stock market listing – The commission also cautioned that no bank should be delisted from the stock exchange before the fair value and acquisition price of general investors’ shares have been determined and disclosed. This, it said, would help prevent unnecessary losses and ensure transparency in the merger process.

Under the Bank Resolution Ordinance 2025, general shareholders are not entitled to any compensation following the merger. A new bank will be listed on the stock market, but existing investors from the five institutions will not automatically receive shares in the merged entity, as new shares will be issued instead.

Prof Abu Ahmed, chairman of the Investment Corporation of Bangladesh (ICB) and a capital market expert, said, “Merging these banks was necessary. The central bank injected thousands of crores of taka into these institutions, yet they couldn’t be managed properly, and their crises persisted. Fraudulent practices drained depositors’ money, so the government had to intervene. In that sense, depositors are lucky.”

He added, “If the banks’ Net Asset Value (NAV) remains positive, shareholders deserve compensation. However, if NAV is negative, they technically deserve nothing. Still, the government may consider protecting small investors because neither depositors nor small investors are responsible for the banks’ failures.”

General investors hold significant stakes

Data from the Dhaka Stock Exchange (DSE) as of 30 September show that general investors hold substantial ownership in all five banks slated for merger – including 65.13% in First Security Islami, 39.28% in EXIM, 31.81% in Union, 31.61% in Global Islami, and 17.92% in Social Islami Bank.

Bangladesh Bank to close nine NBFIs without BSEC consultation

In a parallel move, Bangladesh Bank has decided to shut down nine long-troubled non-bank financial institutions (NBFIs) alongside the merger of the five Shariah-based banks.

The decision was discussed at a meeting of the National Steering Committee on 8 October, chaired by the chief adviser.

After the meeting, Chief Adviser’s Press Secretary Shafiqul Alam briefed the media, citing Bangladesh Bank Governor Dr Ahsan H Mansur.

Asked why the BSEC had not intervened earlier, spokesperson Abul Kalam explained that the central bank had not consulted the capital market regulator about either the bank mergers or the NBFI closures.

He added that no BSEC representative had been included in the committee formed to oversee these processes.

The Financial Institutions Division (FID) of the Ministry of Finance has formed an eight-member committee to implement the bank mergers – again without any representation from the BSEC.