A bold move by the Bangladesh Bank (BB) has sparked a heated debate: Who gets priority when banks merge, and what does it mean for depositors and staff?
Today, BB unveiled a Bank Resolution Scheme, a comprehensive plan to prioritize access to deposits and refund remaining funds for the five merging shariah-based banks. But here's where it gets controversial: the scheme also affects the service conditions and benefits of the merging banks' staff.
Small depositors are at the top of the priority list. Individuals with balances up to Tk 200,000 can breathe easy, as their funds are fully protected and accessible anytime from the scheme's effective date. A heartwarming gesture for those with modest savings.
Vulnerable individuals, such as cancer patients and those requiring kidney dialysis, are also given special consideration. No withdrawal restrictions, regardless of deposit size, is a compassionate approach by BB.
Next in line are institutions like educational and religious bodies, hospitals, and employee funds. They will gradually resume normal transactions, a sign of stability and support for these essential services.
However, depositors with balances exceeding Tk 200,000 face a different reality. Their funds will be released in tranches, with additional amounts of Tk 100,000 every three months. Full access could take up to 24 months, a long wait for those with larger deposits.
For fixed and term deposit holders, the scheme offers automatic renewals upon maturity. Three-month deposits will be renewed three times, while longer-term deposits will be converted into three-year term deposits. A convenient feature, but it may not align with everyone's financial plans.
The profit rate on deposits is set at one percentage point below the bank rate, which could be lower than the original rates offered. A potential loss for depositors, but a necessary measure to ensure the scheme's sustainability.
A unique arrangement applies to institutional deposits held by banks and financial institutions. Fixed deposits of about Tk 7,500 crore will be converted into Class-B shares of the upcoming Sammilito Islami Bank PLC, the state-owned bank formed from the merger. An interesting move that could impact the financial landscape.
Employee uncertainty is a significant aspect of this scheme. The board of directors has the power to change service conditions and reduce benefits, and employees have no say in the matter. Those who disagree with the changes can resign, but they may lose out on certain benefits.
The scheme also outlines the roles and responsibilities of BB, the government, and other authorities in the resolution process. It introduces a structured decision-making process to ensure transparency and accountability, a crucial step in resolving distressed banks.
And this is the part most people miss: the scheme highlights widespread irregularities, including fraud, within the merging banks. The former boards of directors are accused of failing to establish good governance. Despite central bank support, the lenders' financial condition deteriorated, leading to their non-viable status under the Bank Resolution Ordinance 2025.
So, what do you think? Is this scheme fair to all parties involved? Are there any potential loopholes or areas for improvement? Share your thoughts in the comments below!
