Weak banks will be eliminated by bridge banks

The draft Bank Resolution Ordinance proposes that weak or troubled banks in the country will be able to survive their liquidation or liquidation through bridge banks.

Bangladesh Bank has finalized the draft. The draft has been published on the website of the Financial Institutions Division of the Ministry of Finance to seek public opinion on the ordinance.

Incidentally, a 'bridge bank' is an institution created by the central bank to manage a failed bank. A bridge bank plays a vital role in maintaining uninterrupted banking operations during the resolution process.

The proposed draft states that Bangladesh Bank will have the power to establish one or more 'bridge banks' to properly manage the operations of banks in crisis.

These bridge banks will ensure necessary banking services while dealing with the financial instability of failed institutions.

The draft also states that the central bank will have the power to appoint temporary administrators to manage failed banks. The administrators will work as per the instructions of Bangladesh Bank to stabilize weak banks and implement necessary measures.

In addition, to strengthen the financial position of weak banks, funds can be raised through new or existing directors of the banks.

The proposed law will allow Bangladesh Bank to transfer shares, assets, and liabilities of banks under resolution to third parties.

The draft also states that Bangladesh Bank will be able to block the transfer of shares by shareholders of troubled banks. This will help ensure accountability for those responsible for the bank's failure.

If approved by the President, the Bank Resolution Ordinance will be able to stabilize the financial sector, protect depositors, and ensure the proper management of inefficient banks.