The Bangladesh Bank has been granted sweeping powers in the draft of Bank Resolution Ordinance, 2025, allowing it to take over crisis-hit banks, transfer their assets, and hand over operations to a Bridge Banks.
The financial institutions division under finance ministry published the draft law titled 鈥楾he Bank Resolution Ordinance, 2025鈥� on Tuesday and sought public opinion on the law.
The law provides a range of resolution mechanisms, including the creation of Bridge Banks to maintain critical operations, capital restructuring, and asset transfers to third parties.
A bridge bank is a special type of bank that is authorized to take over and operate a failing bank for a limited period of time.
Amid mounting concerns over rising non-performing loans, governance failures, and eroding public confidence, the ordinance aims to strengthen financial stability, safeguard depositors, and hold responsible individuals accountable.
If approved by the President, the law will empower the central bank to take control of non-viable banks, appoint temporary administrators, transfer assets and liabilities, and even sell or merge struggling banks without shareholder consent.
The ordinance empowers Bangladesh Bank to determine the transfer price for distressed banks through open competition and prevents shareholders from disposing of shares once a resolution process begins.
The Bangladesh Bank will establish a separate department to implement its resolution powers and create a Bank Restructuring and Resolution Fund to finance interventions.
The fund will be backed by government contributions, international financial institutions, and risk-based levies on banks.
A core focus of the ordinance is depositor protection.
The law ensures that protected deposits鈥攗p to a specified limit鈥攔emain secure even if a bank collapses.
This measure is expected to address the confidence crisis that has gripped the banking sector, where mismanagement and fraudulent lending have severely weakened the banks.
To further strengthen governance, the ordinance introduces strict measures against bank directors, key management personnel, and major shareholders who engage in financial misconduct.
It grants the Bangladesh Bank the authority to remove and replace top executives, recover undue remuneration, and impose losses on shareholders and creditors in cases of bank failure.
The ordinance also directly addresses past abuses of bank resources by prohibiting insider transactions, the writing off of interest for influential borrowers, and the artificial inflation of bank profits.
It empowers the Bangladesh Bank to prevent shareholders from transferring or disposing of shares in banks under resolution, ensuring that those responsible for a bank鈥檚 downfall cannot evade accountability.
Furthermore, if a bank fails to meet capital or liquidity requirements, or if fraudulent use of funds by its owners jeopardizes its financial health, the central bank can take immediate corrective action.
To enhance crisis management, the ordinance establishes the Banking Sector Crisis Management Council (BCMC), chaired by the governor of the Bangladesh Bank.
This council will coordinate strategies for handling systemic risks, monitor financial vulnerabilities, and work alongside the government and regulatory bodies to ensure a unified approach to crisis resolution.
Experts have reminded that the effectiveness of the ordinance will depend on its implementation.
Bangladesh has a history of financial reforms being undermined by political interference and weak enforcement.
Whether the central bank can act decisively and independently under this new law will determine the extent to which the ordinance succeeds in addressing the deep-rooted problems in the banking sector, they said.
