Central Bank Dissolves Islami Bank Board of Directors

The central bank of Bangladesh, Bangladesh Bank, has removed the chairman and all directors of Islami Bank Bangladesh PLC from their respective positions. The decision was officially announced on Sunday night, 14 June, as part of an intervention to address and manage the ongoing crisis within the financial institution.

According to the official statement from Bangladesh Bank, the termination of the appointments of the board of directors, including the chairman, was executed under the specific powers vested in the central bank. These powers are derived from Section 45 and Section 47(3) of the Bank Company Act, 1991. The regulatory authority explicitly stated that this measures-driven action was taken in the interest of the banking company, the security of its depositors, and the greater public interest.

Regulatory Transition and Governance

Following the dissolution of the existing board, Bangladesh Bank confirmed that its Executive Director, Mohammad Johir Hossain, will assume full responsibility. Under the provisions of Section 47(3) of the Bank Company Act, 1991, Mohammad Johir Hossain has been authorized to exercise all the powers and perform all the duties previously held by the board of directors.

Prior to this sweeping removal, the leadership structure of Islami Bank consisted of five directors, all of whom were independent directors appointed directly by the central bank. The management of the bank had been facing a series of rapid changes and internal instability over the preceding weeks.

• On 24 May, which marked the final working day before the Eid-ul-Adha holidays, the former chairman of Islami Bank, M Zubaydur Rahman, tendered his resignation.

• On the night of the same day, Bangladesh Bank appointed its former Deputy Governor, Md. Khurshid Alam, as an independent director and the new chairman of Islami Bank.

• Shortly thereafter, the Managing Director of Islami Bank, Omar Faruk Khan, also resigned from his post.

Public Unrest and Political Repercussions

The appointment of the new chairman sparked intense dissatisfaction and protests outside the bank. An organisation named the ‘Sadhon Grahaq Forum’ (Conscious Customers Forum) initiated demonstrations immediately after the appointment, demanding the removal of the new chairman alongside a total of seven specific demands. The civil unrest escalated significantly on 1 June, when protesters engaged in violent clashes with the police.

The escalating crisis within Islami Bank also became a subject of heated debate in the National Parliament. Responding to statements made by the Home Minister during a parliamentary session, the Leader of the Opposition, Shafiqur Rahman, expressed deep concern regarding the financial stability of the institution and its wider impact on the nation.

“If Islami Bank suffers further damage, I personally believe that the economy of Bangladesh will sink to the ground,” Shafiqur Rahman stated. “Confidence is a pyramid. If this pyramid tilts or collapses, it will create a lack of trust among the people in the entire banking system, and this mistrust will not bring any positive message for Bangladesh. Those who send remittances to Bangladesh are also experiencing anxiety and instability right now.”

It was against the backdrop of this severe public, economic, and political pressure surrounding the bank’s leadership that the central bank took the final step to dissolve the board completely.