The Bangladesh Bank (BB) initiated the process of merging five ailing Islamic banks on Tuesday, deciding to appoint administrator teams to each of the institutions. Each team will consist of five officials from the central bank, tasked with overseeing the transition.
The banks that will be merged are First Security Islami Bank, Social Islami Bank, Global Islami Bank, Union Bank, and EXIM Bank. They will be merged into a single, state-owned bank.
The decision was approved during a meeting of the central bank's board of directors.
The appointment of administrators to these banks will be completed within this week, and they will be responsible for making all decisions related to the banks, sidelining the existing board of directors.
After the central bank meeting, Bangladesh Bank Spokesperson Arief Hossain Khan told reporters that the full merger process may take up to five years. "The process has already begun. The administrator team will take charge of these banks.
"Although the previous board and management will remain for now, they will be mostly inactive. Once the merger process is complete, the existing boards and management committees will be dissolved," he added.
The proposed name of the new bank is "United Islami Bank", for which Bangladesh Bank is expected to issue a licence soon. The government has also pledged to inject Tk 20,000 crore as capital to facilitate the process. However, the central bank estimates a total of Tk 35,200 crore will be needed to complete the consolidation process.
Worryingly, official data reveals that between 48% and 98% of the banks' total outstanding loans have turned sour.
It is worth noting that First Security, Union, Global Islami, and Social Islami Bank had long been under the control of S Alam Group, while EXIM Bank was controlled by Nazrul Islam Majumder, chairman of the NASA Group.
Over the past week, the central bank has held hearings with each of the five banks regarding the merger.
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