Bangladesh Bank has initiated an Asset Quality Review (AQR) of three banks to tackle the ongoing instability in the nation’s financial sector. The banks involved are IFIC Bank, National Bank, and AB Bank. Officials from the central bank indicated that this action is part of the forensic audit efforts targeting troubled financial institutions.

On Wednesday (August 20), representatives from the global audit firm Deloitte, along with officials from Bangladesh Bank, visited the head office of IFIC Bank to commence this process. Following this review, the future of these banks will be assessed, and decisions may be made regarding their strengthening through merger, acquisition, liquidation, or new capital infusion.

Previously, Ernst & Young and KPMG, funded by the Asian Development Bank, completed an asset review of six banks. Their report revealed that the reported amount of defaulted loans was significantly understated, being four times less than the actual figures.

In the second phase, it has been decided to conduct AQRs for 11 additional banks, with funding from the World Bank. These banks include AB Bank, Bangladesh Commerce Bank, Al-Arafah Islami Bank, IFIC Bank, Islami Bank Bangladesh, Meghna Bank, National Bank, NRB, NRBC, Premier Bank, and UCB.

Officials from the central bank stated that this assessment will provide a clear picture of the actual defaulted loans, provision deficits, capital shortfalls, and the overall status of deposits and loans for each bank. Additionally, it will assist in determining the capital needed for any potential mergers.

At present, ICB Islamic Bank has been excluded from the merger process due to its foreign ownership. Nevertheless, Bangladesh Bank has initiated the initial steps for further evaluations.

As per the central bank’s preliminary strategy, approximately 35 thousand crore taka will be necessary to consolidate the five banks. Out of this amount, 20 thousand crore taka will be requested from the government as an investment. Furthermore, there are intentions to request support from the International Monetary Fund (IMF) and the World Bank, as well as to secure a loan from the ‘Deposit Insurance Fund’. Official government approval will be pursued shortly to execute this plan.