Written by The Banking Post
Bangladesh’s central bank has approved a sweeping plan to merge five struggling Shariah-based banks into a single state-owned lender, tentatively called United Islami Bank, in a bid to rescue the sector from years of irregularities and soaring defaults.
At a special meeting on Tuesday, Bangladesh Bank’s board, chaired by Governor Dr Ahsan H. Mansur, decided to install administrative teams in First Security Islami Bank, Social Islami Bank, Global Islami Bank, Union Bank and Exim Bank. The CEOs will remain in office, but the powers of their boards will be suspended once the administrators take charge this week.
The government has pledged more than Tk 200 billion to capitalise the merger, while the central bank estimates Tk 352 billion will ultimately be needed. Officials said additional funds could come from development partners.
Central bank data show that between 48% and 98% of loans at the five lenders are non-performing. Previous self-restructuring proposals from the banks were rejected as unviable.
Four of the institutions — First Security, Union, Global and Social Islami Bank — have long been linked to the S Alam Group conglomerate, while Exim Bank is associated with NASA Group chief Nazrul Islam Majumdar.
“The move is aimed at restoring public confidence in Islamic banking,” a central bank official said, adding that the full merger could take up to two years to complete.
