Written by The Banking Post
Bangladesh Bank (BB) softens its stance over compensation of the ‘small investors or shareholders’ of the five merged banks, stating that the government can consider compensation to the community if they get any.
The press statement of the central bank issued on Thursday amid strong criticism and protests by the small investors and shareholders of the five financially weak banks a day after the regulator officially started the merger process with declaring net asset value (NAV) per share of the banks zero.
In the statement, the central bank said the bank resolution ordinance 2025 has been formulated following international best practices with considering suggestions and technical assistance of World Bank, International Monetary Fund (IMF) and Foreign, Commonwealth and Development Office (FCDO).
The issue of various types of liabilities of the depositors and shareholders in the resolution-applied banks has been specified. Under the sections 16(2)(ta), 28(5), 37(2)(ga) and 38(2) of the bank resolution ordinance, the central bank can impose the burden of loss on subordinate debt holders accepting shareholders of the scheduled banks, responsible person, additional tier-1 shareholders and tier-2 shareholders under the resolution.
It said if the shareholders of the abolished bank under the ordinance are faced more losses than the actual losses, there is a provision to provide compensation of the differences of the losses.
Under the section-40 of the ordinance, if any shareholder is eligible to get compensation in the evaluation of the BB-appointed independent professional auditors after completion of the resolution process, the compensation can be given.
According to the statement, it has found in the findings of the asset quality review and special inspections by the international consulting firms that the banks are in a massive loss and their net asset value (NAV) per share is negative. It has been decided in the Banking-Sector Crisis Management Committee’s (BCMC) meeting that the burden of the losses of the five severely struggling banks will have be borne by the shareholders.
So, there is no scope for considering issues of protecting interests of the general shareholders and investors in terms of merger of the five banks in accordance with the bank resolution ordinance and BCMC’s decision.
“But the government can consider the issue of providing compensation in respect to protect interest of the small investors and shareholders of the banks,” the statement added.
Earlier on Wednesday last, the BB governor Dr. Ahsan H. Mansur turned down the issue of protecting small investors, saying that the NAV per share (face value at Tk 10) became negative in between Tk 350 and Tk 420. “We should have realised negative value per share for public interest. But we did not do it. Instead, it is being declared as zero. So, shareholders will get nothing,” the governor was saying.
