Bangladesh Bank says investors’ interests can’t be safeguarded in five banks’ merger

Five listed banks see share trading suspended, central bank hints government may consider compensation for small investors

Bangladesh Bank has confirmed that general shareholders will not benefit from the merger of five troubled Shariah-based private banks.

In a statement on Thursday, the central bank said there is currently no provision to protect the interests of general investors in the consolidation, though the government may consider compensation for small shareholders.

Governor Ahsan H Mansur announced on Wednesday that all shares of Exim Bank, First Security Islami Bank, Global Islami Bank, Union Bank, and Social Islami Bank would be declared “zero” as the merger process begins.

The central bank declared the banks “ineffective”, dissolved their boards, forced management resignations, and appointed administrators to manage the process.

At a press conference, Mansur said: “If we calculate assets against shares of all banks, they have gone negative by Tk 350 or Tk 420. We are not demanding money from shareholders.

“According to international practice, shareholders assume responsibility. Since capital is negative, all shares will be zero.”

All five banks are listed on the stock market. Trading was suspended on Thursday to notify investors about the merger.

The central bank noted that the merger would follow international best practices under the Bank Resolution Act.

The act defines the rights of depositors, shareholders and other creditors of banks under resolution.

The Banking Sector Crisis Management Committee decided on Sept 24 that shareholders of the five banks would bear the losses in the resolution process, the statement read.

It confirmed that at present, the interest of the general investors or shareholders cannot be protected in the merger.