Bangladesh Bank Establishes Tk 40,000 Crore Bank Fund

Bangladesh Bank has unveiled plans to create a Bank Restructuring and Resolution Fund (BRRF), a landmark initiative designed to bolster the stability of the country’s financial system and facilitate the orderly restructuring of distressed banks. The fund aims to raise up to Tk 40,000 crore, thereby reducing reliance on government bailouts and enabling banks to address financial stress independently.

The BRRF draws inspiration from the European Central Bank’s resolution framework, under which banks contribute a portion of their deposits to a dedicated resolution fund. In Bangladesh, commercial banks will pay an annual premium of 0.25% of deposits—equivalent to 25 poisha per Tk 100—significantly higher than the existing 0.07% deposit insurance contribution. Over the next few years, the fund could accumulate between Tk 30,000–40,000 crore, providing the central bank with sufficient resources to intervene in cases of severe financial distress without immediate government support.

Governor Ahsan H. Mansur highlighted the proactive approach, stating:
“Bank resolution is a continuous process. We have established a dedicated Bank Resolution Division to monitor early signs of weakness and act through restructuring, mergers, or orderly closure.” At present, five banks are undergoing restructuring, supported by approximately Tk 20,000 crore in government assistance.

In tandem with this, Bangladesh Bank plans to liquidate nine non-bank financial institutions (NBFIs). As these institutions are outside the deposit insurance framework, the government will provide Tk 5,000 crore to compensate affected depositors.

Projected Fund Contributions and Timeline

The BRRF will primarily invest in government securities, and banks will pay risk-based premiums depending on their size and financial health. Late contributions will incur penalties, and repeated delays could result in restrictions on deposit-taking activities.

Expert Reactions

Muhammad A. (Rumi) Ali, former deputy governor, cautioned that stronger banks supporting weaker ones could conceal underlying governance issues.

Mustafizur Rahman of CPD praised the initiative, noting that similar systems in Europe and the U.S. have reduced government expenditure on bank rescues.

Syed Mahbubur Rahman, MD of Mutual Trust Bank, suggested that the 0.25% premium may be low and emphasised the need to strengthen governance, limit political interference, and reduce non-performing loans.

Sohel R. K. Hossain, MD of Bank Asia, described the measure as positive, stressing risk-based and transparent implementation.

While experts acknowledge that the fund alone cannot address deep structural issues in the banking sector, they agree that the BRRF represents a major step toward financial stability and decreased dependence on taxpayer-funded bailouts.