BB asks five merging banks to set shareholder equity at zero

The Bangladesh Bank (BB) has instructed five shariah-based banks undergoing a merger to declare their shareholder equity at zero, after assessments showed the net asset value of those shares to be negative.

The directive was issued yesterday to First Security Islami Bank, Social Islami Bank, Global Islami Bank, Union Bank and EXIM Bank, according to a letter sent by the central bank.

The decision was taken under the Bank Resolution Ordinance 2025, said Areif Hossain Khan, executive director and spokesperson of the Bangladesh Bank.

"An assessment found that the net asset value per share of these banks is negative," he said. "As a result, the shareholders' equity has been written down to zero."

In November this year, Bangladesh Bank Governor Ahsan H Mansur announced that shareholders of the five banks would not receive any stake in the merged new bank as their shares carried negative value, ranging from Tk 350 to Tk 420 per share.

"So the central bank is not taking them into consideration, as they hold zero liability," Mansur said at the time. "No shareholder of the merged banks will get anything."

The write-down has wiped out shareholder investments worth around Tk 4,500 crore in face value -- the original value assigned when the shares were issued.

At market value, the loss was around Tk 1,022 crore, as the shares were trading well below their face value.

Following the merger order by the central bank, the Dhaka and Chattogram stock exchanges suspended trading of the five banks' shares last month.

On November 30, the Bangladesh Bank granted the final licence to Sammilito Islami Bank PLC, formed through the merger of the five lenders. It is now the largest state-owned shariah-based bank in the country.

The central bank said the approval was part of a broader banking sector reform programme launched in September 2024 to restore governance, ensure accountability and bring discipline to the financial system.

The authorised capital of Sammilito Islami Bank PLC stands at Tk 40,000 crore, with each share valued at Tk 10, amounting to 4,000 crore shares. The paid-up capital will be Tk 35,000 crore.

Of this, Tk 20,000 crore has already been provided by the government, which will hold Class A shares, according to the finance ministry.

Another Tk 7,500 crore will come from permanent deposits of depositors of the transferring banks and financial institutions, converted into equity and designated as Class B shares.

The remaining Tk 7,500 crore will be sourced from deposits of other institutional depositors, excluding banks, financial institutions and multinational companies. These will be converted and classified as Class C shares.