The Bangladesh Association of Banks (BAB) has taken the unusual step of urging regulators to make it harder, not easier, for former bank owners to reclaim failed lenders—a sign of how deep the sector's governance crisis runs. At the heart of the problem lies a provision of the newly enacted Bank Resolution Act that allows directors and sponsors of failed banks to buy back control by paying just 7.5 percent upfront of the funds spent rescuing them. They have two years to repay the rest at a simple 10-percent interest. It is, by any standard, a remarkably lenient arrangement.
Bangladesh Bank and the government have already injected capital into five crisis-hit Islamic lenders—First Security Islami Bank, Global Islami Bank, Union Bank, Social Islami Bank Ltd (SIBL) and EXIM Bank—before merging them into a new state entity, Sammilito Islami Bank. Meanwhile, five former shareholders of SIBL have applied to reclaim the institution. It raises the question whether the law was shaped less by reform principles than by the interests of those seeking to return. Bangladesh Bank officials have indicated that the particular application will likely be rejected as the merger proceeds.
The history of how SIBL arrived at this point makes the buy-back bid all the more striking. Investigative reporting by The Daily Star has documented in detail how SIBL was seized in October 2017 in a brazen exercise of state-backed coercion. Before dawn on October 30, nine bank officials and directors were picked up from their homes by men identifying themselves as members of a state intelligence agency. They were held at the DGFI headquarters. Resignation letters were prepared, board minutes drafted, and new appointments formalised, all within the intelligence compound. Bangladesh Bank approved the new leadership in a matter of hours, a process that normally takes at least a week.
The man directing proceedings inside the intelligence office, according to multiple officials present that day, was Mohammed Saiful Alam, chairman of the Chattogram-based S Alam Group. Within months of the takeover, SIBL began disbursing enormous loans to entities linked to S Alam and his family. By September 2024, the bank’s exposure to the group and its affiliates stood at Tk 7,600 crore. SIBL's non-performing loan ratio reached 62 percent and its capital turned negative, forcing the merger that followed in 2025. What was done to SIBL was organised plunder, facilitated by state officers, and enabled by a regulatory culture thoroughly subordinated to political diktat.
The new government has evidently inherited a banking sector in acute distress, with elevated non-performing loans, depleted capital buffers, a legal recovery system paralysed by case backlogs and the misuse of stay orders, and a depositor base whose confidence has been badly eroded. These problems require serious policy attention. The depositors that have borne the cost of years of politically sanctioned looting deserve, at minimum, a clear answer to a simple question: will those responsible be held to account, or handed back the keys?
