Bangladesh Bank has decided to appoint temporary administrators to each of the five struggling Shariah-based banks as part of its plan to merge them into a single entity under the Bank Resolution Ordinance.
The central bank鈥檚 board of directors approved the move on Tuesday, marking a major step toward consolidating the troubled lenders.
The five banks slated for merger are First Security Islami Bank, Union Bank, Global Islami Bank, Social Islami Bank, and Exim Bank. Once combined, the merged entity is expected to be named United Islami Bank.
The government had earlier, on September 7, approved a consolidation plan for these banks, pledging around Tk聽20,200 crore in budgetary support to facilitate the merger.
The total estimated capital injection required, however, stands at Tk 35,200 crore, according to central bank officials.
Bangladesh Bank executive director and spokesperson Areif Hussain Khan said that each bank will be overseen by a temporary administrator team, likely composed of five senior central bank officials.
While the existing boards of directors will remain formally in place, their authority will be suspended once administrators are appointed, rendering their role inactive.
The management of each bank, headed by its respective managing director, will continue to operate, though day-to-day decision-making and execution of the merger plan will be under the administrators鈥� authority.
According to Areif Hussain Khan, the merger process could take up to two years to complete.
BB officials said that the primary objective is to restore confidence in the banking sector by safeguarding depositors鈥� funds and stabilising operations after years of financial mismanagement.
Once the merged bank achieves profitability, the government intends to gradually divest its shares to the private sector, offering stakes to large depositors, while ensuring that small depositors retain unrestricted access to their funds, they said.
Central bank officials said that after the merger, all assets and liabilities of the five banks will be transferred to the new entity.
The decision follows hearings held earlier this month, in which the banks were asked to justify why they should not be merged. First Security Islami, Union, and Global Islami Bank accepted the proposal without objection, while Exim and Social Islami sought additional time, a request that was denied.
Independent audits conducted by both domestic and international firms concluded that consolidation was the only viable option, as between 48 and 98 per cent of the banks鈥� loan portfolios had already turned into defaults.
The crisis facing these banks is deeply tied to the political and financial practices of the previous Awami League government.
Four of the banks were closely associated with controversial businessman S Alam, whose influence over the sector grew unchecked during that period, while Exim Bank was chaired by Nazrul Islam Mazumder, another political ally of the former regime.
Large-scale irregularities and unchecked lending during that time ultimately drove the banks to the brink of collapse, leaving the central bank with little option but to intervene.
