Islami Bank board to be dissolved, S Alam’s shares will be under gov control
Cenbank decides to bring in independent directors
The board of Islami Bank, controlled by S Alam Group, will be dissolved in a couple of days and all shares of the bank under the control of S Alam Group will now be under the government's control, Bangladesh Bank Governor Ahsan H Mansur said today (21 August).
"Independent directors will be appointed for a short period of time. Subsequently, former directors holding 2% of share capital will be taken on the board," the governor told a press briefing.
Currently, among the directors, former shareholders do not hold 2% or more shares, due to which the independent directors will be brought in, he added.
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Governor Mansur said the government has taken control of all shares so far found linked to S Alam and related companies. "If S Alam Group settles all their dues, their shares will be released; otherwise, the shares will be adjusted accordingly," he added.
On Tuesday, following the central bank's instruction, Bangladesh Securities and Exchange Commission (BSEC) ordered bourses and central depository to freeze shares of banks controlled by S Alam Group and associates.
The banks are Islami Bank Bangladesh, First Security Islami Bank, Social Islami Bank, Global Islami Bank, Union Bank and Bangladesh Commerce Bank. Of them, Bangladesh Commerce Bank is not listed in the stock market.
The Bangladesh Bank found each of the directors at the six banks, be it individual shareholders or firms sending nominated directors, are linked to the controversial entrepreneur Mohammed Saiful Alam, known as S Alam.
Officials of Islami Bank have recently sent a letter to the central bank stating that 82% of the bank's shares are controlled by 24 individuals and companies of S Alam Group. They alleged that the group is plotting to embezzle money by selling these shares following the fall of the Sheikh Hasina-led government. They warned that withdrawing such funds could have a severe negative impact on the stock market.
In response to the letter from the officials, the Bangladesh Bank and the BSEC suspended the buying, selling, and transfer of shares for 26 individuals and 56 institutions associated with the S Alam Group.
When asked about the total loans held by the S Alam Group, Governor Mansur said the exact details are not yet known. The information about undisclosed loans is still unavailable, but it will be revealed eventually, he said. "Some time will be needed to obtain these details."
Those who have taken money from the bank and have not returned it will not be spared, he said, adding that all legal measures to recover the money will be pursued.
The governor said, "The boards of weak banks will be dissolved. The board of National Bank has already been dissolved. A decision has been made regarding Islami Bank, and similar actions will be taken for other banks as well."
He added, "Our primary task now is to protect the country's economy. We must take swift actions in various areas to ensure that Bangladesh does not default. It is crucial to address foreign transaction issues to avoid downgrades and improve relations with partner banks. We need to focus on these aspects."
On 6 August, a day after the fall of the Hasina government, disgruntled bankers expelled the officials appointed by the S Alam Group from the bank.
In response to the officials' protests, last Monday the human resources department of Islami Bank dismissed eight individuals, including six deputy managing directors, identified as affiliates of the S Alam Group.
Before taking full control of Islami Bank Bangladesh on 5 January 2017, S Alam Group was already a client of the bank's Khatunganj branch in Chattogram, with a loan exposure of around Tk4,000 crore. However, after gaining control, the group's borrowing from the bank skyrocketed.
According to sources from the central bank and documents from Islami Bank, as of 18 August 2024, the total loan portfolio of Islami Bank stands at Tk1.5 lakh crore, with total deposits amounting to Tk1,53,274.
Of these loans, Tk74,972 crore has been identified as benefiting the S Alam Group, which constitutes half of the total loans. The loans amounting to Tk14,427 crore were directly under the name of seven S Alam Group companies.
The group began acquiring shares in Islami Bank, which was one of the top private banks and highest remittance earners at the time, through newly registered paper-based companies in 2016 and completed the acquisition by the following year.
Seven companies linked to the S Alam Group, which bought the bank's shares, were all registered only in 2016. They are: Excel Dyeing and Printing Limited, Armada Spinning Mills Limited, ABC Ventures Limited, Grand Business Limited, Platinum Endeavors, Paradise International Limited and Blu International.
