Bangladesh’s banking sector is now facing an unprecedented situation. The Bangladesh Bank has announced that ordinary shareholders of five financially distressed Shariah-based banks—set to be merged into a single entity—will have no opportunity to preserve their investment interests. However, the central bank hinted that the government may consider partial compensation to mitigate the losses of small investors.
Governor’s declaration: Shares now ‘worthless’
At a press briefing held at Bangladesh Bank on Wednesday, Governor Dr Ahsan H Mansur said: “The net asset value of the five banks set to merge is now negative. Against a face value of Tk10, the shortfall has reached as much as Tk450. As a result, the shares of these banks are effectively worthless. Neither sponsors nor general investors will receive any compensation.”
This means ordinary investors who bought shares in the five banks will lose their entire investments—an outcome that has sparked outrage among stock market participants.
Investors allege that a corrupt clique looted the banks while Bangladesh Bank stood by as a silent spectator, and now the burden of that looting is being unjustly shifted onto the shoulders of ordinary shareholders.
Dr Mansur further said that the banks had already been declared “non-viable” and their boards of directors dissolved, with administrators appointed in their place.
He assured the public that the central bank is taking maximum precautions to protect depositors’ interests and that depositors with less than Tk200,000 will be reimbursed promptly.
The next day, retail investors in Dhaka announced programs of protests, human chains, and a demonstration in front of the Bangladesh Bank.
Five banks facing merger: Investors in shock
The government’s decision to merge Exim Bank, Social Islami Bank, First Security Islami Bank, Global Islami Bank, and Union Bank—all Shariah-based institutions in severe financial distress—has caused widespread anxiety and anger among investors, as Bangladesh Bank has made it clear that there will be no financial return for shareholders from the merger.
Economists warn that while the main objective of bank resolution is to protect depositors and maintain financial stability, completely disregarding investor interests in publicly listed banks could severely undermine confidence in the capital market.
Dr Toufic Ahmad Choudhury, former director general of the Bangladesh Institute of Bank Management (BIBM), said: “Before merging banks, authorities should have considered the status of both shareholders and depositors. Suddenly announcing that shareholders will receive nothing is unreasonable.”
Dr Al-Amin, associate professor of Accounting at Dhaka University, explained: “Shareholders are entitled to whatever remains after liabilities are settled. But the net asset value per share of these banks is negative—by up to Tk450. In that sense, investors have nothing left to claim.”
He added: “However, justice could still be served if the assets of those who looted the banks are seized and the funds they sent abroad are repatriated.”
Mohammed Mohiuddin, founding director of the Chittagong Stock Exchange, said: “Had the banks gone into liquidation, shareholders might have received something after asset sales and liability settlements. But when liabilities exceed assets, legally they have no claim.”
Investor anger and protest
Mizanur Rashid Chowdhury, president of the Bangladesh Capital Market Investors’ Unity Council, said: “From the moment the merger circular was issued, we demanded its withdrawal. The ineffectual governor ignored us. Now, hundreds of thousands of small investors have been ruined. We will stage a sit-in in front of the Bangladesh Bank with investors from across the country.”
Bangladesh Bank’s clarification: Legal scope for compensation
On Thursday night, Bangladesh Bank’s Department of Communication and Publication issued a statement expanding on the governor’s remarks.
It said that under the Bank Resolution Ordinance, 2025—developed in line with international best practices and with assistance from the IMF, World Bank, and the UK’s FCDO—the central bank has the authority to impose losses on shareholders and responsible parties.
However, Section 40 of the ordinance allows for compensation if shareholders suffer greater losses under resolution than they would have under liquidation.
The statement read: “At present, there is no immediate scope for protecting general investors. However, the government may consider compensating small investors if it so chooses.”
BSEC left in the dark
The capital market regulator, the Bangladesh Securities and Exchange Commission (BSEC), has said it was kept completely in the dark regarding the merger process.
BSEC spokesperson Abul Kalam said: “As the banks are being merged rather than liquidated, we had written to the authorities to ensure protection of general investors. We hope the issue will be taken seriously before delisting.”
BSEC sources confirmed that the commission had submitted five proposals in September to safeguard investors’ interests, all of which were ignored by Bangladesh Bank.
Structure of the new bank
Under the plan, the merged entity—“Combined Islami Bank”—will start operations with an estimated capital base of Tk35,000 crore. Of this, the government will contribute Tk20,000 crore, while depositors will receive shares equivalent to Tk15,000 crore.
The losses for existing shareholders are substantial:
- First Security Islami Bank: 65% general investors
- Global Islami Bank: 32% general, 53% institutional, 15% sponsors
- Union Bank: 54% sponsors, 32% general investors
- Exim Bank: 39% general, 32% sponsors
- Social Islami Bank: 19% general, 69% institutional and foreign investors
Thus, the burden falls overwhelmingly on small and general investors.
The challenge of restoring confidence
A “zero-value” declaration of this scale is unprecedented in Bangladesh’s banking history. While the government and central bank are focused on protecting depositors, investors are losing their life savings. The central bank’s faint signal that small investors might receive some compensation is now their only glimmer of hope.
But the question remains—"Will this promise of compensation ever materialize?”
If investor interests remain unprotected, restoring confidence in Bangladesh’s capital market will be far more difficult—there is no doubt about that.