Compensation for merged banks' shareholders: Salehuddin

The interim government has moved towards arranging compensation for shareholders affected by the merger of five Shariah-based banks, with Finance Advisor Salehuddin Ahmed indicating that the process will be “complex” and carried out in phases.

He said this while speaking at the Secretariat after a meeting of the Advisory Council Committee on Government Purchase on Tuesday.

He said careful calculation and gradual execution would be required due to “technical challenges”.

Asked if affected general shareholders would receive compensation, Salehuddin said: "I have said we will consider this now.

The governor has expressed his view. We, however, have said all depositors will definitely be covered. The second matter is the shareholders."

He added, "Shareholder compensation is a technical matter. In most banks, the net asset value has turned negative, making compensation a complex issue.”

Salehuddin acknowledged that some experts argue shareholders, as owners, must bear the market risks of their investments.

He, however, maintained that investors likely made decisions based on market signals and audited statements that previously showed profits.

"We are looking into how much can be done for them," the advisor said.

The former Bangladesh Bank governor said a model is being developed for distributing compensation.

"How it will be done is being worked on. The next finance minister will ensure the process. When the banks’ financial position turns negative, placing the full burden on shareholders is not reasonable."

On whether affected shareholders will receive a portion of shares in Sammilito Islami Bank, he said: "It will take some time to design the model. For example, someone who bought a large number of shares may receive partial shares and the rest as compensation.

“Calculations are needed because the full burden cannot fall on shareholders."

On broader reforms, the advisor said problems in the banking sector could not be resolved through one-off decisions.

He stressed the need for sustained reforms, stronger regulators and the restoration of market confidence.

Salehuddin also said long-term economic stability would remain elusive without strengthening the stock market and bond market, warning that businesses would continue to rely heavily on banks in the absence of equity participation and a functional bond market.

He added that continuity in current initiatives by the next government would help restore stability across the banking sector and the wider economy.