Ordinance issued: Any bank, financial institution can bow be temporarily taken under state ownership

To rehabilitate bankrupt or at-risk banks, the government and Bangladesh Bank can now temporarily bring any scheduled bank or financial institution under state ownership, according to the Bank Resolution Ordinance, 2025, published in the official gazette on Friday.

The ordinance grants the government and Bangladesh Bank sweeping authority to take actions for the recovery of banks facing insolvency or on the brink of collapse.

It allows for measures such as mergers or the appointment of administrators in the case of weak banks, in line with the ordinance’s provisions.

The ordinance also mandates the formation of a separate unit to handle resolution processes for banks nearing insolvency.

If an administrator is appointed to a bank, a public notice must be issued on the websites of both Bangladesh Bank and the relevant bank, as well as in one widely circulated Bengali and one English-language newspaper.

The Bank Resolution Ordinance, 2025 also allows for the creation of one or more “bridge banks” to ensure uninterrupted operations.

A bridge bank is a temporary institution set up by Bangladesh Bank to manage the operations of a failing or bankrupt bank.

Bangladesh Bank is empowered to suspend or prohibit all business activities of a financially weak bank.

The ordinance states that if a bank’s beneficial owner uses the institution’s assets or funds—either directly or indirectly—for personal or fraudulent purposes, the central bank may initiate resolution proceedings against that bank.

“Resolution” refers to any action taken against such institutions.

In cases of capital shortfalls, the ordinance permits the recapitalisation of struggling banks through existing or new shareholders.

The government and Bangladesh Bank may also temporarily take ownership of any bank or financial institution, including Shariah-based banks.

To do so, Bangladesh Bank may issue one or more share transfer orders, provided the receiving entity is a state-owned company.

If a bank’s licence is revoked, Bangladesh Bank may petition a court for its liquidation. The court will then appoint a liquidator nominated by Bangladesh Bank.

Once a liquidation order is in effect, no further interest or charges will apply to the bank’s liabilities.

The ordinance also allows banks to initiate voluntary liquidation, but not without prior approval from Bangladesh Bank.

Once a licence is revoked, the bank must repay all deposits within seven working days and settle all other liabilities within two months.

Additionally, the ordinance states that individuals will be held accountable if their actions, inactions, or decisions cause harm or lead to the failure of a bank.

Violations of the rules and regulations under this ordinance may result in fines of up to Tk 5 million.