The Bangladesh Securities and Exchange Commission (BSEC), the stock market regulator, has sent a letter to Bangladesh Bank (BB) regarding the planned merger of five commercial banks, urging the central bank to ensure the protection of the interests of general investors.
The letter was sent to the governor of the central bank recently.
While the decision to merge five private banks suffering from weakness and liquidity crises ensures the full protection of depositors, no clear decision has been made regarding the interests of general or small shareholders of these banks.
Later, BSEC sent the letter to secure investor rights.
Sources at Bangladesh Bank indicate that, according to the Bank Resolution Ordinance, 2025, general shareholders may not receive any compensation during the merger process.
The new, merged bank will be listed on the stock market, but the investors of the five existing banks will not have any shares in the new entity, as their shares will be cancelled and new ones issued.
But, market stakeholders argue that the general investors are not responsible for the current state of the five Islamic-focused banks.
They believe the banks' sponsors and directors are the identified culprits, and their assets should be confiscated.
They emphasise that since general investors are not at fault, their shares should not be confiscated, making the protection of their interests crucial during the merger process.
They demand that the government should give the same level of importance to shareholders as it does to depositors.
In its letter to the governor, BSEC stated that general investors are in no way responsible for the current state of the five banks slated for merger-First Security Islami Bank PLC, Global Islami Bank PLC, Union Bank PLC, Social Islami Bank PLC and Exim Bank PLC.
The BSEC asserts that the individuals identified as liable under Section 77 of the Bank Resolution Ordinance-2025 are entirely responsible for the banks' condition, a fact acknowledged in the Ordinance itself.
BSEC highlighted the following points for consideration to protect the interests of general investors during the merger:
Valuation Beyond Balance Sheet: Determining the interest of general investors by valuing the banks' licenses, branch networks, client base, human resource base, service delivery mechanism, and brand value, etc., in addition to the assets displayed on the balance sheets, to arrive at a fair sale price.
Considering Collateral and Confiscated Assets: Determining the general investor's interest by considering the value of collateral against the loans provided by the banks and the collectible funds through the confiscation of movable and immovable properties of the liable persons.
Determining Merger Ratio: Fixing the merger ratio by considering the investment amount made by general shareholders (excluding shares held by the liable persons mentioned in Section 77) as the minimum value of their interest.
No Delisting Before Valuation: BSEC urged the Governor that the five banks should not be delisted from the stock exchange without first determining and announcing the value/ratio of general investors’ interests based on the above evaluations, or without determining and announcing the acquisition price of the shares held by general investors.