Staff Correspondent:

The government and the Bangladesh Bank can jointly take temporary control of any scheduled bank or financial institution, including Islamic banks, by issuing share transfer orders, according to the Bank Resolution Ordinance 2025.

The share transferee must be a government-owned entity, said the ordinance.

Published in the official Gazette on Friday, the ordinance had earlier received approval from the Advisory Council on 17 April.

The ordinance also introduced sweeping powers to hold top bank officials — including managing directors, chairmen, and other responsible officers — personally liable for fraudulent use of a bank’s funds.

These individuals will be obligated to repay the fraudulently used or misused assets or funds to the respective bank. Failure to do so will result in legal action initiated by the concerned bank against the responsible parties.

The ordinance further elaborates that if a bank’s beneficial owner directly or indirectly utilises the bank’s assets or funds for personal gain or fraudulently uses them for the benefit of others, the Bangladesh Bank reserves the right to initiate resolution proceedings against that bank.

“Resolution”, as defined in the ordinance, encompasses the power to take any form of action against the bank in question.

An additional clause within the ordinance allows the Bangladesh Bank to appoint a temporary administrator for any financially weak bank, provided specific reasons are cited.

Furthermore, the central bank is empowered with increasing the capital of such banks through existing or new shareholders and to transfer the shares, assets, and liabilities of the bank to a third party.

The ordinance also outlines circumstances under which the Bangladesh Bank can intervene in the interest of a bank’s well-being if the central bank deems a bank no longer viable or unlikely to become viable, bankrupt or nearing bankruptcy, unable to meet depositor obligations, or having created a situation of financial distress.

Consequently, the Bangladesh Bank will establish a dedicated department to handle these matters, as stated in the ordinance.

There is also a provision for creating one or more bridge banks to ensure the continuity of essential functions and effective management of struggling banks.

These bridge banks can subsequently be sold to third parties. Bangladesh Bank retains the authority to suspend or prohibit all business activities of a weak bank. A bridge bank is defined as a temporary entity formed by the central bank to manage the operations of a weak or bankrupt bank.

In a related development, the ordinance mandates the formation of a seven-member inter-institutional body known as the Banking Sector Crisis Management Council. This council, expanded from the initially proposed six members by the Advisory Council, will be responsible for formulating crisis management strategies and contingency plans.

The Bangladesh Bank governor will chair this council, which will also include the finance secretary, the secretary of the financial institutions division, the chairman of the Bangladesh Securities and Exchange Commission (BSEC), the secretary of Legislative and Parliamentary Affairs, the deputy governor responsible for resolutions, and another deputy governor nominated by the governor. The council is slated to convene once every three months.

The ordinance specifies that upon the revocation of a bank’s license, the Bangladesh Bank will petition the court for its liquidation.

The court will then appoint a liquidator nominated by the Bangladesh Bank. Once the liquidation order takes effect, no interest or other charges will accrue on the bank’s liabilities.

Furthermore, a bank can also undergo voluntary liquidation, but it cannot cease operations without prior authorisation from the Bangladesh Bank.

Deposits must be repaid within seven working days of the licence revocation decision taking effect, and other liabilities must be settled within two months.

Additionally, the ordinance establishes personal liability for losses incurred by a failing bank due to the actions, inactions, or decisions of the individuals concerned.

Violations of the rules issued under this ordinance will incur a fine of Tk50 lakh, with an additional daily fine of Tk5,000 for continued non-compliance.