The director of the weakest bank in the merged bank cannot be the director of any other bank for the next five years. At the same time, the managing director (MD) and deputy managing director (DMD) of the weak bank will lose their jobs.
On Thursday (April 4), Bangladesh Bank has issued the regulations regarding bank merger.
In light of central bank policy, banks in weak (bad condition) will be compulsorily merged if not merged on their own. Before that, the agreement between the two banks should be signed. Then depositors, all creditors and investors have to submit a repayment plan. The central bank will find out the overall financial picture of the bank through external auditors. Finally, the bank will have to apply for the merger to the court.
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According to the circular of Bangladesh Bank, a bank can merge with another bank with the approval and mediation of the central bank. In the light of the power given to Bangladesh Bank regarding quick corrective measures in the amended Bank Companies Act, a circular titled PCA Framework was issued on December 5.
In this, if a bank falls under the PCA framework due to capital and liquidity shortfalls, defaulted loans, good governance deficiencies and activities detrimental to depositors, the concerned bank will have to comply with the Central Bank’s restrictions on recovery. Failure to implement the recovery plan will result in compulsory merger of the bank in the interests of the depositors.
Bangladesh Bank has issued this policy to be followed by the bank in order to complete the merger process in an orderly and orderly manner.
EAR/ZH/JIM
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