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Dhaka Tribune

Guidelines for bank mergers: BB's focus on depositor protection

One significant aspect of these guidelines is the assurance of job security for employees of the merged entity, with a provision prohibiting their dismissal by the acquiring company for three years following the merger

Update : 15 Apr 2024, 09:52 PM

On Thursday, Bangladesh Bank (BB) issued fresh directives stipulating that individuals serving as board members or top executives in banks and financial institutions undergoing mergers will not be eligible for positions within the acquiring entity. 

These guidelines, applicable to both voluntary and compulsory mergers, underscore the importance of safeguarding depositors' interests by either maintaining their accounts in the merged entity or refunding their deposits, as reported by UNB.

This announcement comes four months after the implementation of the Prompt Corrective Action (PCA) framework, which aims to establish a systematic approach for mergers and acquisitions amidst the deteriorating financial condition of certain banks and financial institutions.

One significant aspect of these guidelines is the assurance of job security for employees of the merged entity, with a provision prohibiting their dismissal by the acquiring company for three years following the merger.

Under the PCA, Bangladesh Bank will initially classify banks into four groups based on criteria such as loan disbursement, profitability, and other essential indicators. Subsequently, it will instruct underperforming banks to improve their operations within a 12-month time frame.

Should these banks fail to address their issues and remain vulnerable, the central bank will recommend voluntary mergers with other banks or financial institutions to safeguard the integrity of the financial system.

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