BB initiates five-bank merger to create strongest financial entity

Bangladesh Bank (BB) Governor Ahsan H Mansur on Wednesday said 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.

Formal letters regarding the resolution were issued to the company secretaries of the respective banks,” the BB governor said while speaking at a press conference at the central bank headquarters in the city.

To manage the transition, he said, the BB has deployed a temporary administration and a formal letter regarding the resolution and the appointment of temporary administrators was issued.

Ahsan H Mansur, however, noted that a Central Coordination Committee has been established and met to organise the process.

Each of the five banks will have an individual administrator, supported by collaborators, he added.

He said the administration’s primary function is ensuring business continuity and bank operations must remain open today and tomorrow, handling essential services like payments and remittance settlements.

He also informed that the administration will focus on four main areas like running the business, integrating and overseeing the IT systems, assessing and coordinating the Human Resources (HR) situation, and rationalizing the branch network.

For instance, he said, 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, he added.

Mansur said the banks’ financial situation will be kept under close conservation to prevent further deterioration.

The merger process is expected to take time, possibly one or two years, but the bank aims for rapid completion, he added.

He said 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. Its projected paid-up capital will be Taka 35,000 crore, which is substantially higher than the country's current highest paid-up capital (Taka 1,500 crore),” he added.

He mentioned that although it will initially be a government bank, it will operate like a private bank.

“Within a few months (one or two), 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,” he added.

Regarding staff, the governor stressed that salaries for the new management will be market-based, not tied to government pay scales.

“Existing staff will maintain their current salaries initially, and the BB is not contemplating layoffs at this stage,” he added.

He said 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, he added.

With 7.5 million current depositors across the five banks, Governor Mansur strongly 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.” He added.

The Governor urged depositors to only withdraw what is necessary, assuring them that the resulting entity will be a stronger bank.