A glimmer of hope appears on the horizons for some of the shareholders in the five merged banks as the regulator considers compensating small investors beggared of investments.
The Bangladesh Bank (BB) softens its stance over the conundrum related to compensation for the 'small investors or shareholders' in the five banks, stating that "the government can consider compensation to the community if they get any".
The press statement of the central bank was issued Thursday amid strong criticism and protests by the small investors and shareholders in the five financially weakened banks a day after the regulator officially started the merger process declaring nil the net asset value (NAV) per share in the fallen banks.
In the statement, the central bank says the Bank Resolution Ordinance 2025 has been formulated following international best practices considering suggestions and technical assistance of the World Bank, the International Monetary Fund (IMF) and the Foreign, Commonwealth and Development Office (FCDO).
The issue of various types of liabilities of the depositors and shareholders in the resolution-applied banks has been specified. As per provisions of sections 16(2)(ta), 28(5), 37(2)(ga) and 38(2) of the ordinance, the central bank can impose the burden of loss on subordinate debt-holders excepting shareholders of the scheduled banks, responsible person, additional tier-1 shareholders and tier-2 shareholders under the resolution action.
"If the shareholders of the abolished bank under the ordinance are faced with more losses than the actual losses, there is a provision to provide compensation for the differences of the losses," it explains.
Under section 40 of the ordinance, if any shareholder is eligible to get compensation in the evaluation of the BB-appointed independent professional auditors after completion of the resolution process, the compensation can be given.
According to the statement, it has been found in the findings of the asset-quality review and special inspections by the international consulting firms that the banks are in a massive loss and their net asset value or NAV per share is negative.
It has been decided in the Banking-Sector Crisis Management Committee (BCMC) meeting that the burden of the losses of the five banks on the brink will have to be borne by the shareholders.
So, there is no scope for considering issues of protecting interests of the general shareholders and investors in terms of merger of the five banks in accordance with the bank-resolution ordinance and BCMC's decision.
"But the government can consider the issue of providing compensation in respect of protecting interests of the small investors and shareholders in the banks," the statement reads. Earlier on Wednesday, Bangladesh Bank Governor Dr Ahsan H. Mansur turned down the issue of protecting small investors, saying that the NAV per share (face value at Tk 10) tapered out into negative in-between Tk 350 and Tk 420.
"We should have realised negative value per share in public interest. But we did not do it. Instead, it is being declared zero. So, shareholders will get nothing," the governor was saying.
jubairfe1980@gmai.com
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