BM Desk: Underperforming Islamic Shariah-compliant banks would be merged with stronger organizations with strong boards and no governance issues, according to Bangladesh Bank Governor Ahsan H. Mansur. While larger Islamic banks have experienced substantial restructuring, Mansur pointed out that a number of smaller banks are still having problems during his speech at the 10th Annual Banking Conference on Wednesday.

“The banks that are experiencing issues will be merged. Currently, we lack a comprehensive regulatory framework for Islamic banks. We are examining international models to understand the operations of Islamic banks,” he stated.

Mansur further emphasized, “We are assessing each underperforming bank for potential mergers. If a bank’s board is not operating effectively, the central bank is authorized to step in on behalf of the depositors.”

Describing the move as an “ongoing process”, he said: “The bank reforms are not complete. We’ve already established boards at 11 banks in the first round. Several weeks ago, we created boards for two other banks.”

According to Mansur, a bank has already brought changes to their procedural rules due to the central bank’s pressure.

Bangladesh Bank has been “loud and clear” about the need to conduct banking activities within regulatory frameworks, he said.

The central bank was working to prevent people from “illegally transferring money to another country safely and disappearing”, he said.

“We want to reinforce the banking system in Bangladesh.”

On reforms, he said: “The Bank Company Act is being revised. This will bring about significant changes in the governance of banks. Also, measures are being taken to ensure that the bank boards conduct activities properly.

“This will ensure that the board operates in line with the law and sets rules to assess qualifications needed to become a board member.

He indicated that the revised Bank Company Act would define the number of independent directors permitted on a board and outline the necessary qualifications in accordance with international standards.

Mansur also addressed challenges confronting the central bank. “We are actively addressing these issues. The central bank has undergone various interventions, and as a result, it is being fortified.”

He noted that Bangladesh Bank will not interfere in the daily operations of banks but will instead “monitor” all banking activities.

Additionally, he discussed the importance of “strengthening” agent banking.

“It is essential for women to hold 50 percent representation in agent banking. We are also working on reissuing digital banking licenses, with a focus on providing small loans. Notably, even after the appointment of a new administrator, Nagad experienced a record volume of transactions last month.”

Mansur further stated that mobile financial services, which he described as a “success story,” facilitate daily transactions of Tk 50 billion. He expressed the aim to increase this figure to Tk 60 billion.