April 5, 2024
DHAKA – Board members and top executives of the banks and financial institutions that will see a merger will not be able to hold any position in the acquiring entity, said the Bangladesh Bank (BB) yesterday as it issued a guideline.
The guideline, which keeps provisions for both mutually agreed and forced mergers, says priority must be given to continuing the accounts of depositors of the merged entity or returning their funds.
No employees of the merged entity could be fired within three years of a takeover by the acquirer, said the BB.
The guideline comes four months after the BB issued the Prompt Corrective Action (PCA) framework to give a procedural direction for mergers and acquisitions amidst the deteriorating financial condition of some banks and financial institutions.
In the case of forced mergers, the BB will proceed in phases.
First, in the light of PCA, it will identify banks in four categories based on their disbursed loans, profits and other indicators before directing weak lenders to improve their performances in 12 months.
If the situation does not improve and the vulnerabilities continue, the central bank will ask them to merge voluntarily with another bank or financial institution.
The BB will step in and initiate the process of a forced merger if weak entities keep suffering from capital shortfall, high non-performing loans, and liquidity shortage.