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Highlights:

• Five Islamic banks face a combined equity shortfall of nearly Tk 40,000 crore
• Government to inject Tk 10,000–12,000 crore over the next 2–3 years
• Merger driven by massive loan defaults, deposit withdrawals and seized sponsor stakes
• Exim Bank and SIBL reportedly reluctant; default rates run as high as 95%
• Experts urge clear, bank‐by‐bank resolution plans and challenge merger logic
• “Bridge Banks” under the 2025 Resolution Ordinance could facilitate consolidation

Massive Equity Gap and Government Support

Five lenders—Exim Bank, Social Islami Bank (SIBL), First Security Islami Bank, Union Bank and Global Islami Bank—face nearly Tk 40,000 crore in cumulative equity losses. To close this gap and enable a merger, the government has agreed to inject Tk 10,000–12,000 crore in capital, disbursed gradually over two to three years. The balance will come from selling shares seized from sponsor directors to strategic partners and local investors.

Alarming Asset-Liability Mismatch

• Combined deposits: Tk 140,000 crore
• Combined loans: Tk 195,000 crore
• Deposit-asset gap: Tk 55,591 crore, well above the regulator’s 92% advance-deposit ratio
• Non-performing loans: Exim 28%, SIBL 60%, First Security/Union/Global each 95%
• 70% of total loans already classified as defaulted

Leadership, Job Security and Timeline

Bangladesh Bank Governor Ahsan H. Mansur confirmed the merger is slated for completion by December. He guaranteed job security for lower-level employees but said top management positions would be reviewed. Depositors can continue banking as usual until the merger is finalised.

Resistance and Regulatory Process

A central bank source indicates Exim Bank and SIBL are unwilling to merge. Experts like former World Bank economist Zahid Hussain argue that BB should have first required each troubled bank to submit its own resolution plan and explored liquidation where recovery is impossible. He warns forced amalgamation without a proper feasibility review could waste public funds.

Conversely, CPD’s Mustafizur Rahman supports consolidation given the over-banked market, but stresses the need for a viable post-merger model and potential asset sales to handle bad-debt burdens.

Bridge Banks as a Resolution Tool

Under the Bank Resolution Ordinance, 2025, Bangladesh Bank can set up temporary publicly owned “Bridge Banks” to assume assets and liabilities of failed institutions. Key features:

• Bridge Banks use the Bank Restructuring and Resolution Fund for recapitalisation
• Time-deposit rates remain locked until maturity; other deposit rates can be adjusted
• Original bank’s licence is withdrawn; winding-up follows transfer of assets/liabilities
• Governance by “fit and proper” directors appointed by Bangladesh Bank
• Initial term: two years, extendable annually up to five years
• Termination once resolution objectives—sale, merger or closure—are met

As the central bank finalises legal and operational frameworks, the Bridge Bank mechanism may provide a structured path to merge, restructure or dispose of these crisis-laden Islamic banks.