Dhaka, Bangladesh (BBN)- Bangladesh government has finalized the memorandum and articles of association for the proposed ‘Combined Islami Bank’, which will be formed through the merger of five troubled Shariah-based banks, officials said.
The two foundational legal documents, recently approved by the Financial Institutions Division (FID) under the Ministry of Finance, stipulate that the bank’s initial shares will be distributed among the subscribers of the memorandum and articles of association.
According to an official notification, the new entity will have a seven-member board of directors, headed by the Finance Secretary. Of the 20 billion authorised shares, six directors will hold one share each, while the Finance Secretary will hold the remaining shares of the proposed state-owned unconventional bank.
Under Article 64, directors must hold at least one unencumbered share valued at BDT 10 each in their own name, unless they represent institutional or government interests.
The documents further state that the bank’s total capital shall not fall below 10 per cent of risk-weighted assets, or as prescribed by the Bangladesh Bank (BB) from time to time.
Officials said the central bank is expected to be briefed in detail on the proposed structure on Wednesday afternoon.
A press briefing has also been scheduled at the BB headquarters, where the Governor, Deputy Governors, and senior officials from the Bank Resolution Department will be present.
The central bank has already allocated a 2,336-square-foot office on the 17th floor of Sena Kalyan Bhaban at Motijheel in the capital, from where the entire merger process will be coordinated.
The new entity will be the country’s first-ever full-fledged government-owned unconventional bank, combining the operations of the five crisis-hit lenders.
According to the BB’s merger roadmap, the proposed bank will have a paid-up capital of BDT 350 billion, with BDT 200 billion coming from government equity and the remaining BDT 150 billion sourced from the Deposit Insurance Trust Fund and institutional deposits.
The combined non-performing loans (NPLs) of the five banks total around BDT1.47 trillion, accounting for 77 per cent of their total outstanding loans.
Union Bank tops the list with an alarming 98 per cent NPL ratio, followed by First Security Islami Bank (96 per cent), Global Islami Bank (95 per cent), Social Islami Bank (62 per cent), and EXIM Bank (48 per cent).
BBN/SSR/AD