Last update on: Mon May 12, 2025 12:20 PM
The government and Bangladesh Bank can take temporary control of any scheduled bank if needed by issuing share transfer orders in line with the Bank Resolution Ordinance 2025.
The ordinance states that the share transferee must be a government entity.
The government published an official gazette on Friday on the Bank Resolution Ordinance 2025, which was approved by the Advisory Council on April 17.
The ordinance states that if a bank’s owner directly, indirectly or fraudulently utilises the bank’s assets or funds for personal gain, Bangladesh Bank reserves the right to initiate resolution proceedings against that bank.
The central bank will have the power to appoint temporary administrators to manage banks in financial disarray. These administrators will operate under central bank directives to stabilise weak banks and implement necessary recovery measures, said the ordinance.
Furthermore, the central bank will be able to raise capital through new or existing shareholders to strengthen the financial position of banks in distress.
Under the ordinance, the BB will be able to sell or liquidate weak banks by forming “bridge banks” — financial institutions that temporarily take over a failed bank.
Bridge banks are designed to ensure seamless banking services while providing time to find a buyer for the troubled institution. They play a crucial role in maintaining uninterrupted banking operations during the resolution process.
Additionally, bridge banks act as isolators, separating distressed banks from the broader sector and absorbing them to prevent panic withdrawals or bank runs.
The new ordinance states that the BB will have the authority to establish one or more bridge banks to run critical and viable functions of banks in distress.
The central bank will create a dedicated department to manage the resolution of scheduled banks so that these functions remain outside its regulatory and supervisory roles.
A “Bank Restructuring and Resolution Fund” will also be formed to finance interventions, backed by government contributions, international financial institutions, and risk-based levies on banks.
In cases where banks fail to meet capital or liquidity requirements or engage in fraudulent activities that risk their financial health, the BB will be authorised to take immediate corrective action.
