In a dramatic regulatory move, Bangladesh Bank on Sunday dissolved the entire Board of Directors of Islami Bank Bangladesh PLC, including its newly appointed chairman, in what it said was a move to protect the interests of depositors and safeguard public money.

The central bank removed all directors of the country’s largest Shariah-based commercial lender with immediate effect under the powers vested in it by the Bank Company Act, 1991.

BB appoints observer to Islami Bank to restore discipline, protect depositors

Bangladesh Bank Assistant Spokesperson Shahriar Siddiqui confirmed the development, noting that the unprecedented step was taken in the public interest to ensure good governance and maintain stability across the banking sector.

According to a circular issued by the central bank on Sunday evening, the appointments of the chairman and all existing directors on the board have been cancelled.

To maintain continuity in the bank's administration and supervisory operations, the central bank has vested all powers and duties of the dissolved board in Bangladesh Bank Executive Director Mohammad Johir Hossain. 

He will exercise full managerial and administrative authority under Section 47(3) of the Bank Company Act, 1991, effectively serving as the administrator.

The sweeping intervention follows intense scrutiny, severe liquidity challenges, and public controversies surrounding the management and leadership changes at Islami Bank.

Financial analysts believe it is too early to tell whether the direct takeover of the board by the regulatory authority can indeed be a step towards restoring regular financial operations, calming panic-stricken depositors, and stabilizing the country's broader financial landscape.