Five-member board being constituted

Mohammad Zahir Hossain, the Bangladesh Bank (BB)-appointed head to take care of the crisis-hit Islami Bank operations, has said a five-member board is being constituted for the bank.

He has called upon depositors to keep their faith in the bank as there is no opportunity to look back.

Mr Hossain, an executive director of the central bank, made the call while taking charge on Monday, a day after the banking regulator had dissolved the bank's entire board amid growing cash withdrawals.

Addressing a press briefing at Islami Bank's Dilkusha headquarters in the capital, he said depositors should not be worried and should continue their banking transactions without any disruptions as the central bank had stepped up to take care of the operations of the country's largest Shariah-based bank.

He said scrutiny was underway to form a full-fledged board of directors with qualified and completely neutral individuals for the struggling bank to help it regain its past glory.

"A five-member board is being constituted. Proper scrutiny is necessary. We want to appoint completely impartial people who will be able to run the bank efficiently. We hope a sound and neutral board will be in place very soon," he also said.

Mr Hossain noted that he was currently serving as a single-member board for a limited period, with the primary objective of ensuring that the bank's operations continued without interruptions.

"The primary objective is to protect depositors' interests and restore their confidence," he said, adding that depositors were effectively the institution's most important stakeholders.

In a deliberate attempt to reassure customers, he stressed that the central bank retained confidence in the bank's existing management and day-to-day operations would continue under acting managing director Altaf Hossain.

"The board's role is policy direction. The management will continue to run the bank," he said.

Senior officials, including Altaf, were present during the briefing.

According to Islami Bank officials, the bank plunged into severe trouble in terms of managing liquidity following days of unrest, which erupted after the Eid-ul-Azha holidays over the appointment of new chairman Md Khurshed Alam.

In the first 10 days of this month, the unconventional bank witnessed deposit outflow amounting to around Tk 90 billion, leading to the deepening of liquidity stress, officials said.

In latest developments, the central bank provided another package of emergency liquidity support of Tk 25 billion to help mitigate the crisis.

Confirming the developments, Assistant Spokesperson for the Bangladesh Bank Mohammad Shahriar Siddique said the central bank disbursed the emergency liquidity assistance on Monday.

"In the last two days (June 14 and 15), the Bangladesh Bank provided Tk 50 billion to ease the bank's ongoing liquidity stress," Mr Siddique, also a director of the central bank, said.

Apart from the last two days' cash support in response to the lender's Tk 100 billion emergency cash support pledges, the bank got cash support involving around Tk 1.70 billion from the regulator last week.

Meanwhile, the Association of Bankers, Bangladesh (ABB) welcomed the decision of the central bank governor to dissolve the existing board of directors of Islami Bank, including its chairman, and facilitate a fresh start for the institution.

In a statement issued on Monday by the office of ABB Chairman and Managing Director of City Bank, Mashrur Arefin, the association described the decision as timely and prudent for the banking sector.

The statement said as the Islami Bank issue had got political overtones and given the bank's systemic importance, the ABB had expressed its deep concern to the governor on June 10.

They conveyed that an early resolution would be beneficial for the industry as the situation at Islami Bank was no longer an issue concerning a single institution.

"Its impact was being felt across the banking sector. As the issue had assumed a political dimension, we also advised that efforts be made to resolve it through dialogue and consensus among the relevant stakeholders.

"In this context, we believe the decision made yesterday by the central bank is commendable. We hope it will restore stability at Islami Bank and rebuild the confidence of its depositors, investors, and stakeholders," the statement said.

In the interest of the banking sector, the ABB expects substantial progress at Islami Bank in terms of good governance, accountability, a banking environment free from political influence, and the recovery of its huge non-performing loans.

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