Parliament Scrapes Controversial Banking Provision
Parliament has passed an amendment removing a controversial provision from Bangladesh’s Bank Resolution Act that could have allowed former shareholders of troubled banks to regain ownership of shares, assets and liabilities. The government said the provision had failed to work in practice and had attracted concerns over the possible return of disputed former bank owners.
In a Nutshell
- Parliament passed the Bank Resolution (Amendment) Bill, 2026 on September 9 that repeals Section 18(a) of the Bank Resolution Act.
- The provision allowed former shareholders of a bank under resolution to apply to regain shares, assets and liabilities.
- The government said no individual or institution had met the provision’s strict regulatory requirements since the law came into effect.
- The provision had faced criticism over the possibility of former or disputed bank directors and shareholders returning to ownership.
- The issue drew particular attention during the merger of five troubled Islamic banks into Sammilito Islami Bank.
Context
Section 18(a) was originally designed as a market-based option for restructuring distressed scheduled banks without liquidating them. The government said its purpose was to address capital and liquidity shortages, protect depositors and investors, and reduce the burden on public funds. However, the provision became controversial because former shareholders who held stakes before a bank entered resolution could potentially apply to regain ownership.
The provision was particularly scrutinised following the merger of five troubled Islamic banks into Sammilito Islami Bank. The government has now decided to remove it after no applicant met all the conditions required under the provision.
Why It Matters
The amendment matters because bank resolution is ultimately about protecting depositors and restoring confidence in the financial system. Allowing former or disputed owners to return to institutions that have already entered a resolution process may create questions over whether the restructuring is actually removing the problems that caused the banks to fail.
What We Think
A provision intended to attract capable investors ended up raising concerns about the possible return of former owners to troubled banks. Its removal closes that particular route and makes the restructuring framework easier to understand. However, troubled banks still have to be dealt with in a way that protects depositors and prevents the same governance failures from returning under a different arrangement.