Bankers voice concern over Islami Bank turmoil as central bank seeks consensus solution

The Association of Bankers, Bangladesh (ABB), an organisation representing bank chief executives, has expressed deep concern over the ongoing instability surrounding Islami Bank, warning that the situation is affecting confidence across the wider banking sector.

"The situation at Islami Bank is not merely an issue of a single institution but is having a negative impact on the entire banking sector," said ABB Chairman Mashrur Arefin, adding that bankers are "highly concerned" about the developments.

He made the remarks today (10 June) following a high-level meeting with the Bangladesh Bank governor.

Mashrur Arefin, who is also managing director of City Bank, said the governor views the situation at Islami Bank not only as a banking-sector issue but also as a political matter, and is attempting to resolve it through consensus among the parties concerned.

The ABB chairman further said the governor has taken a strict stance on ensuring good governance in the banking sector, urging chief executives not to yield to political pressure. He also instructed banks to ensure accurate reporting to the Credit Information Bureau.

The meeting also discussed measures to increase credit flow in the banking sector. 

According to Mashrur, the government and the central bank are planning a new Tk60,000 crore package to support credit growth, with a focus on small, medium and micro enterprises (SMEs).

The funds are expected to be disbursed through the central bank's refinancing schemes.

Mashrur added that the governor also highlighted inaccuracies and delays in data submitted for export and import transactions, which are creating complications in national accounting.

He noted discrepancies in import pricing and said that, amid current market instability, banks have been advised to verify prices through global platforms or online sources before opening letters of credit (LCs) to avoid overpricing and potential losses to the country.

Earlier, on 24 May, M Zubaidur Rahman resigned as chairman and was subsequently replaced by former deputy governor Md Khurshid Alam. Khurshid had stepped down from his position as deputy governor following the fall of the Sheikh Hasina government on 5 August amid mass protests.

His appointment sparked discontent among a section of the bank's customers and shareholders. Amid the ongoing protests, the resignation of managing director Md Omar Faruk was accepted during a virtual board meeting on 1 June.

Meanwhile, the Bangladesh Bank has appointed Mohammad Ashraful Alam as observer to Islami Bank.

In a statement issued yesterday, the central bank said the observer had been appointed to closely monitor the bank's overall activities, safeguard the institution's interests, protect depositors and ensure broader public interest, the statement said.

As observer, Ashraful Alam, who served as executive director of Bangladesh Bank, will participate in meetings of the bank's board of directors and other relevant activities.

He will also provide the central bank with necessary information and observations regarding the bank's operations.

The central bank expressed hope that the appointment would help strengthen discipline and public confidence in Islami Bank's operations.