Bangladesh Bank (BB) has issued the “Regulations for Bank Resolution, 2025” under the recently enacted Bank Resolution Ordinance, 2025 (BRO 2025), establishing a comprehensive legal and operational framework for resolving distressed banks, including Islami banks and finance companies.

Formulated by the Bank Resolution Department (BRD), the designated resolution authority, the regulations aim to ensure orderly resolution, financial stability, and Shariah compliance where applicable.

 They translate the statutory provisions of the Ordinance into actionable procedures, promoting transparency, consistency, and effectiveness in managing troubled financial institutions. The regulations apply to all scheduled banks, including Islami banks, banking and financial groups, and other related entities.

For Islamic institutions, references to capital instruments, eligible liabilities, payouts, pricing, and debt will be interpreted as Shariah-compliant instruments and profit-sharing contracts, ensuring the integrity of underlying Shariah principles.

Main objectives of the new regulations include ensuring effective and orderly resolution of banks, maintaining continuity of critical Shariah-compliant financial services, protecting depositors and investment account holders in line with Shariah principles, and avoiding interest-based obligations while enabling bail-ins or conversions to Shariah-compliant instruments.

Resolution plans must include recapitalisation strategies, asset and liability transfers, hierarchy of claims, depositor protection, and liquidity continuity.

 Operational measures cover the appointment of management, staff retention, and continuity of essential services.

The BRD has been empowered to establish governance arrangements, coordinate with other government agencies, and utilise the Deposit Insurance Fund for timely payouts or transfers of protected deposits, including those under Shariah-based accounts.

For Islami banks, the regulations authorise the creation of a Shariah Advisory Panel and consultations with scholars to ensure compliance in all resolution actions, instruments, and transfers.

 Key mechanisms include liability segmentation, bail-in conversion to equity or Sukuk-type instruments, continuity of Shariah governance, and management of Islamic treasury and profit rate risk.

The BRD may issue further guidelines, circulars, or directives to clarify implementation, with compliance mandatory for all scheduled banks. In case of any conflict, the Ordinance will prevail over the regulations.

With this new framework, Bangladesh Bank aims to enhance the resilience of the financial sector while ensuring that Islami banks operate in full alignment with Shariah principles, thereby reinforcing confidence and stability across the banking system.