Amidst the ongoing tension surrounding the mandated merger of weak and strong banks in Bangladesh’s banking sector, Bangladesh Bank (BB) has enforced limitations on journalist access.
On Thursday, unlike regular weekdays, journalists covering the banking sector were denied entry to the Bangladesh Bank headquarters in Dhaka. This decision was attributed to an order from the bank’s higher authorities.
Pressure has mounted on the central bank following the publication of banks’ health indices, which categorized them into green, red, and yellow zones earlier this month. Concerns escalated further with the initiation of merger talks, leaving directors and employees of stable banks apprehensive.
Several managing directors voiced concerns, particularly regarding the merger of the Shariah-based Export Import (Exim) Bank with the struggling Padma Bank, fearing potential repercussions on the stronger banks.
With Bangladesh Bank already identifying 34 weak banks out of 54 analyzed, plans are underway to merge 10 of these with stronger counterparts by early 2025. Twelve banks are categorized as “poor,” with nine already in the red zone, while 29 fall in the yellow zone, with three nearing the red category. Only 16 banks, including eight local ones, maintain a status in the green zone.
BB Executive Director Md Mezbaul Haque emphasized that weak banks have until December 2024 to merge voluntarily; otherwise, the central bank will intervene in March 2025 to enforce mergers.
The signing of a memorandum of understanding (MoU) between Exim Bank and Padma Bank for their merger, along with ongoing discussions among other banks, signifies a proactive approach toward consolidation, a move generally supported by economists. However, concerns persist over the merger of healthy banks with weaker counterparts.
While some, like Centre for Policy Dialogue Executive Director Mustafizur Rahman, commend certain mergers, they advocate for a more strategic approach, suggesting that healthy banks should not be compelled to merge with weaker ones.
Former central bank governor Salehuddin Ahmed echoes similar sentiments, emphasizing the importance of voluntary mergers over forced ones.
As per the categorization, prominent banks like Prime Bank, Eastern Bank, and HSBC fall under the “green zone,” while troubled institutions such as BASIC Bank and Janata Bank are listed in the “red zone.” Meanwhile, a multitude of banks populate the “yellow zone,” including both conventional and Shariah-based banks, each facing varying degrees of financial stability.
Notably, certain banks were excluded or not considered due to a lack of available information.
