Concerns Over Banking Stability Following the Bank Resolution Act 2026

The integrity and stability of the national financial sector face renewed scrutiny following the enactment of the Revised Bank Resolution Act 2026. Financial experts and economists have expressed significant apprehension that certain provisions within the new legislation could inadvertently facilitate the return of individuals previously implicated in financial irregularities and the misappropriation of funds to positions of bank ownership.

These concerns were the focal point of a roundtable discussion titled “Revised Bank Resolution Act 2026: Banking Sector Discipline at Risk Again,” held on Saturday, 25 April 2026. The event, organised by Voice for Reform, took place in the Karwan Bazar district of the capital and convened a panel of prominent academics, former regulators, and industry leaders to dissect the implications of the legislative changes.

Regulatory Loopholes and the “Bail-out” Culture

A primary point of contention involves Section 18(A) of the revised Act. Critics argue that this specific clause provides a mechanism for former owners and directors, who presided over periods of systemic looting and mismanagement, to regain control of banking institutions.

Toufic Ahmad Choudhury, the former Director General of the Bangladesh Institute of Bank Management (BIBM), asserted that the fundamental issue within the sector is not a deficiency of legislation, but rather a persistent failure in enforcement. He observed that the new Act appears to offer “bail-out” facilities for offenders rather than ensuring rigorous accountability.

Mr Choudhury further emphasised the following points regarding depositor protection and institutional exit strategies:

• Legal Obligation to Depositors: He maintained that the central bank, Bangladesh Bank, holds a definitive legal and moral responsibility to return the entirety of depositors’ funds. Relying solely on the 200,000 BDT limit provided by deposit insurance is deemed insufficient to meet this obligation.

• Absence of Exit Policies: The lack of an effective “exit policy” for the banking sector remains a critical flaw. Currently, the tendency is to sustain loss-making institutions through state intervention rather than allowing for orderly closure or restructuring. This practice ultimately transfers the financial burden to the general public.

• Non-Performing Loans (NPLs): He called for a strict distinction between “wilful” and “unintentional” defaulters. The habitual rescheduling of loans has, in his view, eroded discipline, and without the certainty of punishment for financial crimes, no amount of legislation will prove effective.

Risks of Contagion and Institutional Failure

The potential for systemic instability was further highlighted by Dr Mushtaq Khan, a professor at the School of Oriental and African Studies (SOAS), University of London. He cautioned that the abrupt closure of banks as a corrective measure carries inherent risks of contagion, whereby a crisis in one institution triggers a loss of confidence across the wider sector.

Dr Khan warned that unless exemplary punishment is meted out to those who have systematically plundered bank assets, the sector remains vulnerable to a “bank run”—a scenario where mass withdrawals by panicked depositors lead to a total liquidity collapse.

Adding to the discourse on restructuring, Saokat Hossain, Head of Online at Prothom Alo, noted that while global precedents for bank restructuring include mergers and liquidations, these are not universal solutions. He argued that merging weak institutions is unlikely to yield sustainable results, particularly when deep-seated issues such as the illicit siphoning of credit remain unaddressed.

The Necessity for Good Governance

The discussion underscored that many existing irregularities could have been mitigated had current laws been applied with impartiality. Badiul Alam Majumdar, Secretary of Citizens for Good Governance (SHUJAN), remarked that the primary obstacle to financial discipline is the lack of accountability for those involved in historical malpractice.

The roundtable, moderated by Fahim Mashroor, founder of Voice for Reform, also featured contributions from:

• Professor A.K.M. Waresul Karim of North South University.

• Asif Khan, President of the CFA Society.

• Shams Mahmud, a prominent businessman.

• Sarwar Tushar, politician.

The collective consensus of the panel suggests that while the Bank Resolution Act 2026 was intended to provide a framework for handling distressed assets, the inclusion of Section 18(A) and the absence of a robust enforcement mechanism may instead compromise the long-term discipline and public trust in the banking industry.