Written by The Banking Post
The Bangladesh Bank has launched an asset quality review (AQR) of three more banks—IFIC Bank, National Bank, and AB Bank—as part of its ongoing forensic audits into financially stressed lenders.
Global auditing firm Deloitte, appointed for the task, began the process on Tuesday (20 August) with a visit to IFIC Bank’s headquarters, accompanied by central bank officials, according to insiders.
Officials said the review will provide a clear picture of the banks’ actual financial health and guide future decisions, including whether they should be merged, acquired, dissolved, or recapitalised.
Part of a wider review
In July, Bangladesh Bank approved the second phase of AQRs covering 11 banks, funded by the World Bank. The list includes AB Bank, Bangladesh Commerce Bank, Al-Arafah Islami Bank, IFIC Bank, Islami Bank Bangladesh, Meghna Bank, National Bank, NRB, NRBC, Premier Bank, and UCB.
The review will determine the true scale of non-performing loans, provisioning shortfalls, capital gaps, and the overall status of deposits and loan portfolios. It will also help assess how much additional capital is required if mergers are pursued.
Earlier findings raise red flags
This move follows an earlier review of six banks conducted by Ernst & Young and KPMG with support from the Asian Development Bank. That assessment revealed a grim picture—default loans were nearly four times higher than previously disclosed by the banks themselves.
The findings pushed the regulator to accelerate plans for restructuring the weakest institutions in the sector.
Merger plans on the table
Among struggling Shariah-based banks, ICB Islamic Bank has been kept out of the merger process due to foreign ownership. Bangladesh Bank has made a preliminary decision to combine the remaining five Islamic lenders into a single new entity.
To finance the merger, a draft plan proposes spending Tk 35,000 crore. Of this, Tk 20,000 crore would come as government investment, while the rest would be raised through a loan from the Deposit Insurance Fund and potential support from international lenders such as the IMF and the World Bank.
The central bank is preparing to send a formal proposal to the government seeking approval for the plan.
Why it matters
Banking sector experts say the ongoing AQRs are crucial to restore credibility in the financial system, where weak governance, rising defaults, and capital shortfalls have eroded public confidence.
“The reviews will finally reveal the true health of the banks, which is essential before any merger or recapitalisation decision,” said a central bank official.
The regulator is expected to complete the current round of reviews in the coming months, setting the stage for the most significant restructuring of Bangladesh’s banking sector in years.
