The passage of the Bank Resolution Act, 2026 in the parliament has ignited a firestorm of debate across the banking sector, academia, and the business community.
At the heart of this controversy lies the newly inserted Section 18A, a provision that allows former shareholders of distressed or merged banks to reclaim ownership under specific conditions.
While Finance Minister Amir Khosru Mahmud Chowdhury frames this as a "window of opportunity" dictated by economic reality, critics warn it may institutionalize a "culture of impunity" and weaken accountability.
The transition of the bank resolution framework from an emergency ordinance to a permanent law has brought significant policy shifts.
Most notably, the Bank Resolution Ordinance, 2025 explicitly barred individuals or groups responsible for a bank’s collapse from ever returning to ownership, even if they repaid their debts.
The new 2026 Act effectively relaxes this strict prohibition.
The structural changes are also evident in the numbers: the original 98 sections of the ordinance have been streamlined into 75 sections in the Act.
Key modifications include the removal or reduction of chapters regarding voluntary liquidation and the replacement of references to the Deposit Insurance Act with the new Deposit Protection Act, 2026.
The most debated addition, Section 18A, provides a mechanism where shareholders from before a bank's resolution—or individuals deemed "fit and proper" by Bangladesh Bank—can apply to reclaim shares, assets, and liabilities.
This effectively opens the door for controversial business groups, such as the S Alam Group and Nassa Group, to potentially return to the helm of the five merged banks they once controlled during the previous administration.
However, the law stipulates that this opportunity is strictly conditional.
Applicants must submit a detailed undertaking promising to repay all financial assistance provided by the government or Bangladesh Bank, invest fresh capital to meet existing shortfalls, settle all liabilities toward depositors and creditors, clear all outstanding taxes and revenues and provide compensation where necessary, and submit a clear plan to strengthen corporate governance, risk management, and internal controls.
Defending the Act in Parliament, Finance Minister Amir Khosru Mahmud Chowdhury argued that the government has already injected approximately Tk80,000 crore into weak banks, and the requirement for further funds is immense.
He contended that Section 18A would relieve the government of some of the immense financial burden, increase the likelihood of depositors getting their money back, restore investor confidence in the capital market, and protect the interests of small, general shareholders who were not involved in management decisions.
Not all shareholders are equally responsible, the minister noted, emphasizing that small investors should not be penalized for the failures of board-level management.
Economists warn
Despite the government's optimism, prominent economists have expressed deep skepticism.
Dr Zahid Hussain, former lead economist at the World Bank Dhaka Office, views the move as a dangerous precedent.
He raised concerns that the very people under whose management the banks failed are now being invited back.
A primary concern is the source of the "fresh capital." Without strict vetting, there is a risk that owners might take loans from other banks to buy back their original ones.
Hussain warned that this sends a message that one can break the rules and eventually receive a "pardon," essentially fostering a culture where accountability is non-existent.
The legislative shift has sent ripples through the banking district. Rumors regarding the return of former owners have caused significant unease, particularly among the staff of Islami Bank Bangladesh Limited.
Social media platforms are rife with speculation, and reports suggest that scheduled board meetings at merged institutions are being postponed or canceled amid the uncertainty.
The context for this tension is the recent merger of five Shariah-based banks—Exim, Social Islami, First Security Islami, Union, and Global Islami—into a single entity called Sammilito Islamic Bank, which has been established with a total paid-up capital of Tk35,000 crore.
This capital structure includes a direct government investment of Tk20,000 crore, while the remaining Tk15,000 crore is slated to be distributed among depositors in the form of shares.
To further bolster public confidence, Tk12,000 crore has been allocated from the deposit insurance fund, ensuring that customers can receive an immediate payout of up to Tk2 lakh as part of the bank's stabilization efforts.
The backdrop to this merger is a history of massive irregularities. A BFIU report previously highlighted that the S Alam Group alone allegedly withdrew Tk225,000 crore from 11 banks and financial institutions.
‘Suicidal’ decision?
Dr Iftekharuzzaman, executive director of Transparency International Bangladesh (TIB), has been a vocal critic, describing the decision as "suicidal."
Speaking to Dhaka Tribune, he argued that the move rewards those involved in corruption rather than holding them accountable.
He characterized the policy as a continuation of "cronyism," where the end of an authoritarian regime simply leads to a change in which group "captures" the policy.
He questioned the logic of allowing former owners—who have been accused of pioneering irregularities—to return by paying only 7.5% of the required amount upfront while settling the remaining 92.5% over two years at a 10% interest rate.
Iftekharuzzaman expressed grave doubts about whether Bangladesh Bank, as a regulator often embroiled in conflicts of interest, could effectively enforce the stringent conditions laid out in the law.
He feared that this would institutionalize a culture of loan defaults, eventually shifting the entire financial burden onto the general public.
The Bank Resolution Act, 2026, forces a confrontation between two philosophies of reform: one focused on punishment and accountability, and the other on pragmatic, market-based recovery.
Whether Section 18A leads to a genuine revival of the banking sector or serves as a backdoor for the return of "bank looters" will depend entirely on the transparency of its application and the political will of the regulator.