BB plans to merge 10 banks in a year

Bangladesh Bank (BB) Executive Director and Spokesperson Mezbaul Haque on Tuesday said that the regulator is planning to merge 10 banks within a year.

“Following the merger, the weak bank can become the strong bank while strong banks can be stronger banks,” he told reporters at a press briefing at the BB headquarters in Dhaka, reports BSS.

Mezbaul said BB's various departments assess different components regularly for financial risk management. But it is not a real health indicator, he added.

He said, "We developed a Prompt Corrective Action (PCA) framework to classify banks. As a result, banks will be evaluated in four categories. This will be done based on the balance sheet of 2024. It will be implemented from May 2025."

Mezbaul said that weak banks could merge with good ones by December 2024 on their own, otherwise, BB will decide on the merger issue.

After December 2024, the BB will make a decision on which bank will merge with whom, and then the bank's board of directors will lose the authority to decide on the merger issue, reports UNB.

Regarding the Bank Health Index report published in the newspapers, he said this does not present the actual health of banks. It is a partial report that is prepared by different departments of the central bank for calculating the risky areas of the banking sector.

Mezbaul said that the BB is doing reports on banks' operations and financial health on a quarterly and half-yearly basis as part of regulations.

Replying to a question that some good banks have also been enlisted in the list of yellow categories in the BHI report, he said that the central bank usually works based on the actual balance of a particular bank, not on the assumption.

Regarding the merger of 10 weak banks with the strong banks, a BB spokesperson said that banks will be merged to maintain the global standard, and depositors would not be affected by this process.

However, the BB in the secret report titled Bank Health Index said that as many as 29 banks were in the yellow zone, meaning their financial health was between good and fragile.

The report brought all banks under a common platform using the international CAMELS rating system, which is used by bank supervisory authorities to rate financial institutions according to six factors represented by its acronym: capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to market risk.

The banks in the 'red zone' are AB, National, Bangladesh Commerce, Padma, BASIC, National Bank of Pakistan, Janata, Agrani and Rupali, according to the latest edition of the "Banks Health Index and HEAT Map", a biannual report prepared by the Financial Stability Department of the BB.

The banks in both the red and yellow zones need supervisory attention, the report stated.