Trading of five Sharia-based banks has been suspended in the capital market following the Bangladesh Bank's decision to merge them due to severe financial irregularities and liquidity crises.
Although depositors of these banks have been assured that their money will be returned, the shareholders and sponsor directors are likely to lose their investments, as the combined capital of the five banks has been declared 450 per cent negative in Bangladesh Bank's financial statement.
Bangladesh Bank Governor Dr Ahsan H Mansur has announced that the shares of general investors have been set to zero without prior consultation, creating widespread concern among retail shareholders who now face significant losses.
According to market sources, uncertainty looms large over the fate of ordinary shareholders in these banks, all of which are listed on the stock exchanges. Investors and market stakeholders are questioning what will happen to their shares once the merger is finalised.
In response, the Bangladesh Securities and Exchange Commission (BSEC) has written to the central bank, urging it to proceed with the merger while safeguarding the interests of general investors.
BSEC emphasised that shareholders are not responsible for the current financial condition of the banks and should therefore not be penalised.
While the central bank has prioritised depositor protection, the lack of clarity regarding shareholder compensation has left thousands of general investors in distress, with market analysts urging urgent policy intervention to restore confidence in the capital market.
Governor Mansur explained that the share price of the five banks has been set at zero as their liabilities exceed their assets, with each Tk 10 share showing a negative net asset value of up to Tk 450. Consequently, both sponsor and general shareholders will receive no compensation.
General investor Ibrahim Ovi told The Daily Observer, "I bought shares of Exim Bank and First Security Islami Bank knowing the risks. But declaring our shares null and void is completely illegal. We will take legal recourse."
The five banks - First Security Islami Bank, Social Islami Bank (SIBL), Global Islami Bank, Union Bank, and Exim Bank - were declared non-functional under Section 15 of the Bank Resolution Ordinance 2025. Four of them were controlled by S. Alam Group, while Exim Bank was managed by businessman Nazrul Islam Mazumder, both of whom were close to the previous Awami League government.
Last October 30, the Interim Government's Advisory Council approved the proposal to merge the banks into a single new entity. The new bank will have an authorized capital of Tk 40,000 crore and a paid-up capital of Tk 35,000 crore. However, no decision has been finalized regarding compensation or share conversion for existing investors, causing further anxiety in the stock market.
Following the merger news, the share prices of the banks plummeted, with SIBL, Exim Bank, and First Security Islami Bank among the top ten losers on the Dhaka Stock Exchange (DSE), declining by 7 to 8.5 percent. Shares of Global Islami Bank and Union Bank also fell sharply.
Saiful Islam, President of the DSE Brokers Association (DBA), said, "According to standard rules, when a company's liabilities exceed its assets, shareholders usually receive nothing upon liquidation. The merger plan so far appears to offer no relief package for shareholders."
Meanwhile, sources at Bangladesh Bank indicated that BSEC's recommendations will be reviewed before the merger is finalized.
BSEC has urged that all assets - including licenses, branch networks, customer bases, human resources, and brand value - be re-evaluated to determine a fair merger ratio and to ensure small investors are not unduly harmed. The regulator has also advised against delisting the banks until investor protection measures are in place.
Bangladesh Bank has assured depositors that their funds are secure. Depositors with balances below Tk 2 lakh will be allowed to withdraw their full amount in the first phase, funded by the government's Deposit Protection Fund. Withdrawal applications will begin in November under the supervision of administrators appointed by Bangladesh Bank.
Despite the dissolution of the boards, officials confirmed that banking operations such as payments, remittances, and letters of credit (LCs) will continue uninterrupted.
Incidentally, according to the Dhaka Stock Exchange (DSE), as of October 31, 68.71 per cent of the shares of SIBL were held by institutional investors, 0.87 per cent by foreign investors and 18.90 per cent by general investors.
Global Islami Bank has 53.37 per cent shares held by institutional investors and 31.20 per cent by general investors.
First Security Islami Bank has 28.90 per cent shares held by institutional investors, 0.15 per cent by foreign investors and 65.05 per cent by general investors.
Exim Bank has 27.80 per cent shares held by institutional investors, 0.55 per cent by foreign investors and 39.21 per cent by general investors.
Union Bank has 13.64 per cent shares held by institutional investors, 0.01 per cent by foreign investors and 31.86 per cent by general investors.
