Bangladesh Bank has instructed all scheduled banks to establish a dedicated resolution coordination unit.
The unit will serve as a single monitoring point for regulatory bodies to get information about key risk indicators 鈥� including capital adequacy, liquidity, asset quality, and large exposures 鈥� to detect early signs of financial distress and maintain readiness for potential resolution actions.
Mass terminations of employees or major organisational changes will require prior approval from the Bank Resolution Department (BRD) of the central bank to prevent operational disruption, according to the resolution.
BB issued a comprehensive regulation titled 鈥楻egulations for Bank Resolution, 2025鈥� on October 23 to ensure the orderly management and restructuring of weak and non-viable banks.
The move aims to safeguard financial stability, protect depositors, and institutionalize the process of resolving distressed institutions through clear legal and procedural measures.
Approved in the board meeting of the central bank on October 6, the regulation operationalises the Bank Resolution Ordinance, 2025 and empowers the newly formed Bank Resolution Department as the independent authority responsible for executing all resolution actions.
It comes at a time when several banks face liquidity strain, capital shortages, and depositor confidence challenges.
Each bank must establish a Resolution Coordination Unit (RCU) headed by a deputy managing director to coordinate data submission, monitor early-warning indicators, and maintain readiness for potential resolution actions.
The regulation also mandates regular resolvability assessments by the BRD to identify structural or legal impediments that could delay or complicate a bank鈥檚 resolution.
Banks failing to address deficiencies may face penalties, restrictions on dividends, or corrective structural measures.
Depositor protection is prioritised through mechanisms ensuring prompt payouts from the Deposit Insurance Fund and preservation of critical banking services during resolution.
Under the new rules, resolution may be initiated when a bank is deemed non-viable or has no reasonable prospect of recovery through private-sector measures.
The BRD, acting as the resolution authority, will determine non-viability based on key indicators such as capital adequacy, liquidity position, asset quality, and the ability to meet obligations to depositors and creditors.
Fraud, insider abuse, or serious legal breaches by management can also trigger intervention.
Once resolution begins, the central bank may appoint an administrator to assume full control of the bank, replacing the board and senior management.
The administrator, acting under BRD鈥檚 direction, will secure the bank鈥檚 premises, records, and systems, ensure uninterrupted operations, and prepare a comprehensive inventory of assets and liabilities.
If necessary, Bangladesh Bank can impose a short moratorium on certain obligations to stabilize operations.
The regulation introduces several resolution tools including purchase and assumption, bridge bank formation, bail-in, and asset transfer mechanisms.
For Islamic banks, all such actions must maintain full Shariah compliance, with the BRD empowered to form a Shariah Advisory Panel to guide every step of the process.
In mergers involving Islamic banks, both the transferor and transferee institutions must be Shariah-compliant.
To prevent ad-hoc interventions, all scheduled banks are now required to prepare detailed Resolution Plans, updated annually or semi-annually for systemically important institutions.
By introducing the Bank Resolution Regulations, 2025, Bangladesh Bank has effectively established the country鈥檚 first formal resolution framework鈥攁ligning local practice with global standards adopted after the global financial crisis.
The regulation provides a legal and procedural foundation to handle bank distress in an orderly, transparent, and depositor-centric manner.
