Administrators picked to lead their merger into one govt bank

Bangladesh Bank has picked and may appoint administrators to the five crisis-hit Islamic banks this week under the modus operandi for their merger into a state-owned sharia-based lender, officials said.

The central bank is executing the mergers under provisions of the Bank Resolution Ordinance 2025 promulgated by the post-uprising government for carrying out reforms, like mergers and acquisitions, where needed, in the banking sector.

With the administrators taking seat, the boards of directors of the unconventional banks will stand dissolved and the process of merger the five into a government-owned shariah-based bank will begin, according to the sources.

Under the salvage plan, the central bank has already allotted office space for the proposed United Islami Bank PLC or United Islami Bank of Bangladesh PLC at Sena Kalyan Bhaban in the business-heartland Motijheel from where the mergers will be executed.

A detailed proposal for forming a new bank through the merger is expected to be presented for final approval by the government at a meeting of the advisory council of the interim government very soon. Upon its approval, the banking regulator will issue gazette notification stipulating the amalgamation of five into one.

Earlier, the central bank approved a plan of merger of the five financially troubled Islamic banks: First Security Islami Bank, Social Islami Bank, Global Islami Bank, Union Bank, and Export Import Bank of Bangladesh PLC (EXIM Bank).

The reason stated is to stabilise the country's financial sector, after years of misdirected operations.

Seeking anonymity, a BB official says they have already selected five administrators, to take transitional responsibility of these liquidity- crisis-ridden banks in the coming week.

"After their appointment, the board of directors of these commercial lending entities will be dissolved," the central banker told The Financial Express.

The administrators are two executive directors and three directors of the Bangladesh Bank.

He says the central bank authorities led by Governor Dr Ahsan H. Mansur are expected to present the detailed merger roadmap to the advisory council of the interim government for its final approval within days.

"This meeting is very important. Soon after securing approval from the advisory council, we'll issue gazette notification about the merger move, which will officially be executed step by step," the central banker informed.

On condition of anonymity, another BB official says the whole merger process will be operated from a 2336-square-foot office which has already been allotted by the BB on the 17th floor of Sena Kalyan Bhaban in Motijheel.

"From this office, the five banks will be amalgamated to form the country's first-ever full-fledged government-owned unconventional bank named United Islami Bank PLC or United Islami Bank of Bangladesh PLC," he told reporters.

The central banker mentions that the government has also formed an eight-member working committee with BB Deputy Governor Dr Md. Kabir Ahmad as its convener.

According to him, the committee has been given the responsibility to oversee the legal aspects related to the merger initiative.

According to the BB merger-related roadmap, the proposed new bank will have a paid-up capital amounting to Tk 350 billion of which the government will provide Tk 200 billion as equity. And the remaining Tk 150 billion would come from the deposit-insurance trust fund and institutional deposits.

The combined non-performing loans (NPLs) of the five banks are around Tk 1.47 trillion, which accounts for 77 percent of their total loan disbursements.

Union Bank shares the highest percentage of such dud money at 98 percent, followed by First Security Islami Bank (96 percent), Global Islami Bank (95 percent), Social Islami Bank (62 percent) and EXIM Bank (48 percent).