Bangladesh Bank (BB) on Tuesday dissolved the board of directors of National Bank Limited (NBL) for governance failures and deteriorating financial condition.
The move aims to protect depositors' interests and restore order in the bank.
NBL, the country's first-generation private bank, was facing significant challenges, including an alarming rise in defaulted loans and capital shortfall.
By the end of September 2023, the bank's defaulted loans amounted to Tk135 billion with over 92 per cent categorised as bad loans.
This financial instability contributed to NBL's inability to issue cash dividends since 2019 and led to a capital deficit worth Tk20.24 billion.
The central bank's decision to dissolve the board followed recommendation from the Bangladesh Securities and Exchange Commission (BSEC). Allegations against the board included the misuse of power, violation of loan regulations, and attempts to manipulate board elections.
Concerns were further heightened when a director filed a writ to halt the Annual General Meeting scheduled for December 21, 2023.
The BB also formed a new board, with Professor Syed Ferhat Anwar of the Institute of Business Administration (IBA), Dhaka University, as its Chairman.
New board members include Sirajul Islam, former executive director of Bangladesh Bank; Md Kamal Hossain, former managing director of Southeast Bank; and sponsor director Khalilur Rahman.
Previous board's three directors have been retained.
BB intervened to addressing governance issues in NBL.
BB expects that the new leadership will steer NBL towards financial stability and protect depositors' investments.
The dissolution came just days after the bank's board of directors declined to merge with United Commercial Bank (UCB).
"Without any discussion, the central bank decided to merge National Bank with the UCB. On April 9, the last working day before Eid, fear spread among the depositors and officials after they came to know this decision. Many people started withdrawing money from NBL," said an NBL official.
"Some branches in Dhaka incurred losses due to high defaulted loans. We have started collecting money from defaulters," he said.
