Bangladesh Bank has removed all members of the board of directors, including the chairman, of the country’s largest Sharia-compliant bank, Islami Bank Bangladesh PLC.
The central bank has taken this important decision in the context of ongoing instability surrounding the bank, lack of customer confidence and liquidity crisis.
Bangladesh Bank said in a statement on Sunday (June 14) night that the appointment of all directors, including the chairman of the board of directors of Islami Bank, has been cancelled under the powers conferred under Section 45 and Section 47(3) of the Banking Companies Act, 1991. It said that this decision has been taken considering the interests of the bank, protection of depositors and public interest.
Bangladesh Bank also said that in accordance with Section 47(3) of the Bank Companies Act, the Executive Director of the Central Bank, Mohammad Zahir Hossain, will temporarily exercise all the powers and perform all the duties of the Board of Directors.
Why this decision?
Islami Bank has been embroiled in a controversy over a recent leadership change. On May 24, the bank’s chairman, Professor M. Zubaidur Rahman, resigned, and on the same day, former Bangladesh Bank deputy governor Md. Khurshid Alam was appointed as the new chairman.
After this appointment, a section of the bank’s customers, officers, shareholders and the ‘Conscious Customers Forum’ started a movement. The protesters raised seven demands, including the removal of the chairman.
The situation gradually became heated. Protest programs were held in front of various branches and head offices of the bank. On June 1, there was a clash between the protesters and the police.
Lack of confidence and liquidity crisis
After the appointment of a new chairman, a massive withdrawal of deposits began due to lack of confidence among customers. Within a few days, deposits worth thousands of crores of taka were withdrawn from the bank, which put pressure on the bank’s liquidity management.
In this situation, Bangladesh Bank recently provided emergency liquidity assistance to Islami Bank and also appointed an observer to monitor the bank’s activities.
The focus of discussion in Parliament too
The situation of Islami Bank also became a topic of discussion in the National Parliament. Opposition Leader Dr. Shafiqur Rahman warned that if people’s trust in Islami Bank is lost, it could pose a major risk to the country’s overall banking sector and economy.
He said, “Trust in the banking sector is an important issue. If this trust is damaged, it can have a negative impact on the country’s financial system, including remittance flows.”
Important issues:
All directors, including the chairman, of Islami Bank have been removed.
Bangladesh Bank has taken a decision under the Bank Company Act.
Executive Director Mohammad Zahir Hossain will temporarily assume the duties of the board.
There had been a movement for several weeks over the appointment of the chairman.
The bank faced a liquidity crisis due to customers withdrawing their deposits.
The central bank had already appointed liquidity support and observers to control the situation.
Through this decision, Bangladesh Bank is trying to resolve the ongoing crisis of Islami Bank, restore customer confidence, and restore the bank’s normal operations.