STAR BUSINESS REPORT

The Bangladesh Association of Banks (BAB) has called for a reconsideration of certain provisions in the recently enacted Bank Resolution Act, saying that allowing former owners to regain control of troubled lenders through a limited upfront payment could raise concerns over accountability, governance and moral hazard.

The plea was made during a meeting between a BAB delegation led by Chairman Abdul Hai Sarker and Bangladesh Bank Governor Md Mostaqur Rahman at the central bank headquarters in Dhaka yesterday.

The association, which represents bank sponsors and owners, shared this view as the Bank Resolution Act was passed in the House last month. The revised law included provisions allowing former owners to reclaim merged banks under relatively easy terms.

According to the law, former directors or owners of banks under merger or listed for merger can pay 7.5 percent upfront of the amount injected by the government or the BB to regain control. The remaining 92.5 percent is to be repaid within two years at 10 percent simple interest.

While welcoming the government’s initiative to establish a structured resolution framework, BAB said the mechanism should ensure a strong “fit and proper” assessment, forensic audits, verification of fund sources and transparent regulatory oversight.

As part of its banking reform initiatives, the interim government approved the Bank Resolution Ordinance 2025. Under it, five crisis-hit lenders -- First Security Islami Bank, Global Islami Bank, Union Bank, Social Islami Bank and EXIM Bank -- were brought under the merger process.

The BB later issued a licence for a new state-owned entity, Sammilito Islami Bank PLC, in November last year, which is expected to become the country’s largest state-owned shariah-based lender.

After the Bangladesh Nationalist Party (BNP) came to power following the national election in February, the ordinance was amended and enacted as the Bank Resolution Act 2026.

Subsequently, five sponsor shareholders and former directors of troubled Social Islami Bank PLC applied to regain control of the shariah-based lender. However, senior BB officials told The Daily Star last week that the request was likely to be rejected as the merger process moves ahead.

Against this backdrop, BAB said international investors, development partners and global financial institutions closely monitor the credibility of financial sector resolution frameworks.

“Any perception of weak accountability may negatively affect investor confidence, depositor sentiment, and international financial perception regarding Bangladesh,” the association said.

It added that depositor protection, governance reform, financial discipline,