The introduction of Bangladesh’s new bank resolution framework has triggered sharp controversy, with Transparency International Bangladesh (Transparency International Bangladesh) warning that provisions allowing former owners of failed banks to regain control could undermine financial sector reforms and encourage a return to past governance failures.
In a strongly worded statement issued on Monday (13 April), the anti-corruption watchdog described the inclusion of a clause permitting previous shareholders of merged or weakened banks to re-enter ownership structures as “self-defeating” and potentially dangerous for the country’s banking stability.
Concerns Over Return of Former Owners
According to TIB, the revised Bank Resolution Act introduces a mechanism that could enable individuals or groups previously associated with the mismanagement of distressed banks to regain ownership positions. The organisation argues that such a provision risks reversing efforts to restore discipline in the financial sector and could reopen pathways for corruption and asset stripping.
The group warned that instead of strengthening accountability, the law may institutionalise impunity, allowing actors responsible for past irregularities to re-emerge within the system under regulatory protection.
Legal Reversal and Policy Shift
TIB highlighted a significant policy shift compared to the earlier Bank Resolution Ordinance 2025, which reportedly barred former owners of failing banks from reclaiming control even if outstanding liabilities were settled.
However, the new legislation introduces a revised provision—identified as Section 18(a)—that alters this position, enabling former stakeholders to return under specified conditions. The organisation claims this effectively replaces accountability measures with opportunities for reinstatement.
Key Financial and Governance Concerns
TIB Executive Director Dr Iftekharuzzaman criticised the framework, arguing that it may reward those previously linked to financial misconduct rather than ensuring legal accountability.
He also questioned the financial structure outlined for reacquisition of bank ownership, noting that former owners would be required to pay only a small upfront share of the valuation, with the remainder spread over time under concessional terms. According to his remarks, such arrangements raise concerns about fairness, feasibility, and enforcement.
Illustrative Structure of Concerns Raised
| Issue Highlighted |
TIB Concern |
| Ownership reinstatement clause |
Risk of return of former “irregular” owners |
| Payment structure |
Low initial payment with deferred settlement |
| Accountability mechanism |
Weak enforcement of financial responsibility |
| Governance risk |
Potential conflict of interest in oversight |
| Economic impact |
Possible burden on depositors and public funds |
Allegations of Weak Oversight
The organisation further questioned how compliance with post-recovery conditions would be effectively monitored, particularly given the perceived limitations of regulatory independence. TIB argued that conflicts of interest within supervisory bodies could weaken enforcement, increasing the risk of non-compliance.
It also warned that, in practice, such provisions could allow influential stakeholders to restructure obligations in ways that ultimately shift financial risks onto depositors, taxpayers, and the broader economy.
Broader Governance Criticism
Dr Iftekharuzzaman suggested that the legislative change reflects a broader pattern in financial sector governance, where shifts in political and institutional power structures have not necessarily eliminated opportunities for influence and control over banking assets.
He also linked the current framework to previous contentious decisions in the sector, arguing that reforms must go beyond structural changes and ensure genuine enforcement of accountability.
Call for Accountability-Based Reform
TIB emphasised that any meaningful banking sector reform must prioritise transparent legal processes, strict enforcement of financial responsibility, and exclusion of individuals responsible for past systemic failures from regaining control of financial institutions.
The organisation warned that without such safeguards, the new law could fail to deliver substantive improvement in governance, potentially entrenching the very risks it aims to resolve.
Outlook
The debate over the Bank Resolution Act underscores ongoing tensions between financial stabilisation measures and governance accountability in Bangladesh’s banking sector. While policymakers argue that restructuring tools are necessary to safeguard depositor interests and maintain stability, critics maintain that without strict ownership restrictions, reform efforts may be undermined by repeated cycles of mismanagement and recovery.
As implementation begins, attention is likely to focus on how regulatory authorities balance crisis management with long-term institutional integrity.
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