Dhaka: Governor Ahsan H Mansur today announced that the central bank has officially initiated a significant resolution process involving five commercial banks, marking the commencement of a planned merger intended to strengthen the country's banking system. "The five institutions in question have been deemed non-viable, having concluded that they can no longer function effectively or maintain capacity," he said.
According to Bangladesh Sangbad Sangstha, formal letters regarding the resolution were issued to the company secretaries of the respective banks. The BB governor stated this while speaking at a press conference at the central bank headquarters in the city. To manage the transition, the BB has deployed a temporary administration and issued a formal letter regarding the resolution and the appointment of temporary administrators.
A Central Coordination Committee has been established to organize the process, noted Ahsan H Mansur. Each of the five banks will have an individual administrator supported by collaborators. The administration's primary function is ensuring business continuity, with bank operations remaining open to handle essential services like payments and remittance settlements.
The administration will focus on running the business, integrating and overseeing IT systems, assessing and coordinating the Human Resources (HR) situation, and rationalizing the branch network. For instance, where five branches exist on one street, that number may be reduced to one.
The Governor confirmed that the boards of the five banks have ceased operation as of today. The chairmen and managing directors (MDs) were thanked for their hard work and attempts to save the banks, and their service to the banking system was recognized.
Mansur mentioned that the banks' financial situation will be closely monitored to prevent further deterioration. While the merger process is expected to take one or two years, the bank aims for rapid completion. A key strategy regarding financial management has been submitted to the government, and once the merger is complete, the government will be able to provide liquidity support.
The resulting entity aims to be the strongest financial bank, with a projected paid-up capital of Taka 35,000 crore, substantially higher than the country's current highest paid-up capital of Taka 1,500 crore. Although it will initially be a government bank, it will operate like a private bank.
Within a few months, the management, including the MD and Board, will be reconstituted with professionals. Salaries will be market-based, not tied to government pay scales, and existing staff will maintain their current salaries initially. The existing workforce, even if considered excessive, will be redeployed through the combined 750 branch network of the five banks. The strategy involves utilizing this workforce for network expansion into remote areas, with an initial focus on increasing deposits.
With 7.5 million current depositors across the five banks, Governor Mansur emphasized that the new institution is government-backed, meaning there should be no fear or reason for unnecessary withdrawals. To build future confidence, the new entity will operate under a Sharia Council Board. Depositors are assured that they will receive market-based interest or profit starting from the first day of unification.
The Governor urged depositors to withdraw only what is necessary, assuring them that the resulting entity will be a stronger bank.