2024-04-05 10:10:33
The central bank has decided to merge weak banks with strong banks. In this continuation, a decision has been made in the meeting of the managing directors of the banks with the governor of Bangladesh Bank regarding the merger of 6 state-owned banks. The board of directors of the banks have been asked to call a meeting soon to take a decision regarding the merger.
Meanwhile, on Thursday (April 4), Bangladesh Bank has issued a policy on bank mergers. According to the policy, the weak banks will be merged with the strong banks.
Related sources said that Sonali Bank, Bangladesh Development Bank-BDBL, Bangladesh Krishi Bank, Rajshahi Krishi Development Bank, Basic Bank and Agrani Bank- these 6 banks have been decided to merge. Sonali Bank and Bangladesh Development Bank-BDBL, Bangladesh Krishi Bank and Rajshahi Krishi Development Bank-Rakab will be merged soon. Accordingly, the central bank has been asked to inform the decision of the board meeting. Sources present at the meeting said that if not, the central bank will merge these banks on its own initiative.
According to Bangladesh Bank sources, there has been a discussion to merge Basic Bank with a state-owned bank. Apart from this, there have been talks about merging several private banks.
Executive Director and Spokesperson of the Central Bank. Mejbaul Haque said that continuous meetings are being held in Bangladesh Bank to merge weak banks with strong banks. But when any bank will be merged will be officially informed.
Meanwhile, the central bank has issued a policy for merger of weak banks with strong banks. The banking rules and regulations issued by the Bangladesh Bank’s policy department have stated what facilities the banks will get if they are merged. However, in case of merger, the managing director and deputy managing director of the weak banks will lose their jobs and the director of the weak bank will not be able to be the director of any other bank for the next 5 years, according to the policy.
As per the policy, banks in bad condition will be compulsorily merged if they do not merge on their own. A memorandum of understanding has to be signed between the two banks before the merger. Then the detailed plan especially the plan for repayment of depositors, all creditors and investors should be submitted. After that, Bangladesh Bank will find out the overall financial picture of the bank through external auditors. At the end of various processes, the final application for merger must be made to the court.
Earlier, a PCA framework was provided based on four indicators—Non-performing loans, capital adequacy, management and liquidity. Bangladesh Bank will classify the banks below the desired criteria in that index as ‘weak’. The last step to pull out the weak banks is to merge them with other good banks. The government also agreed to it. The amended Bank Companies Act empowers Bangladesh Bank to take quick corrective measures. In the light of this power, a circular titled PCA Framework was issued on December 5.
It is said that if a bank falls under the PCA framework due to capital and liquidity deficit, high level of non-performing loans, good governance deficiency and above all activities harmful to depositors, the concerned bank will have to comply with the Central Bank’s restrictions on recovery. Failure to implement the recovery plan will lead to compulsory merger of banks in the interest of depositors. This policy is issued for the Bank to follow in order to complete the merger process in an orderly and orderly manner.
It further states that after the merger, the payment of deposits to individual depositors or the activation of their accounts and banking transactions shall generally be given priority. Institutional depositors should take the approval of Bangladesh Bank by formulating a repayment action plan for full repayment of money at specified time. Bangladesh Bank shall approve the proposed plan, with or without necessary modifications, for the trial implementation of the work plan.
As per the policy, the officers and employees of the merged bank cannot be retrenched within 3 years. However, after 3 years, the performance of the officers and employees can be evaluated and a decision can be taken. After the merger, the director of the weak bank will lose his position. Even within 5 years he cannot become a bank director. The Managing Director, Additional Managing Director and Deputy Managing Director of the defunct bank or financial institution shall not be retained in any position in the merged bank. However, after the dissolution of the board of the merged bank, the MD, AMD and DMD can be appointed to any position on the basis of a new contract if they think fit.
If it is a government-owned institution, in that case, the MD, AMD and DMD of the concerned bank or financial institution can be retained or transferred by the government to another bank or financial institution. After the merger, the demerged bank’s loans should not become defaulted and a separate unit should be formed to supervise the loans and recover the defaulted loans. After the asset management company is formed, the said defaulted loan or investment can be sold along with the collateral security taken against the loan or investment.
Method of integration
If two or more banks or financial institutions in the sector agree to merge, then those banks or financial institutions shall present the matter to their respective boards and obtain in-principle approval. After that they will get approval from Bangladesh Securities and Exchange Commission if they are listed in Bangladesh Bank and related banks. Thereafter, the transferee bank and the transferor bank or financial institution shall appoint one or more audit firms from among its registered audit firms to complete the audit, financial and legal work of the transferee bank or the financial institution to be acquired.
In this case Bangladesh Bank will bear the cost of completing the audit and financial and legal work. The concerned audit firm shall submit its audit and financial and legal proceedings report to Bangladesh Bank for the purpose of smooth and proper execution of the entire consolidation process including payment of claims of depositors, creditors and shareholders. The concerned bank will maintain the confidentiality of the information while carrying out these matters. Failing this, Bangladesh Bank can cancel its approval.
When the report from the audit institution is submitted to Bangladesh Bank, the report will be given to the receiving and transferring company. They will then present to their respective Board of Directors for approval and decision. Special resolutions shall be taken by convening a special meeting for the consent of the shareholders or creditors. In this case the consent of the majority of creditors or shareholders or members should be taken. The transferee bank will apply for Bangladesh Bank’s approval after approval of the scheme of amalgamation in the special general meeting. After the satisfaction of Bangladesh Bank, it will apply for approval to the High Court Division for implementation.
If the High Court does not object to the approval the transferee and the transferee company shall file a copy of the order of the High Court for registration with the Registrar of Joint Stock Companies. Accordingly, for the implementation of the scheme, necessary steps will be taken by giving notice to the shareholders and other stakeholders and sending a copy of the scheme to the National Board of Revenue, Bangladesh Securities and Exchange Commission. Following these provisions the two institutions will be merged.