The cabinet on Monday gave in-principle and final approval to the draft "Bank Resolution (Amendment) Act, 2026", clearing the way to repeal a provision of the existing law that found no takers despite being designed to offer banks a market-based lifeline.

The decision was taken at the 16th cabinet meeting, chaired by Prime Minister Tarique Rahman, held in the evening at the Cabinet Division meeting room in the Secretariat.

The original Bank Resolution Ordinance, 2025 was issued to ensure timely resolution of risks facing scheduled banks: including capital shortfalls, liquidity crises, insolvency or existential threats, and to safeguard overall financial stability.

To convert the ordinance into permanent law, a bill was placed before the first session of the 13th National Assembly, which referred it to a parliamentary Special Committee for detailed scrutiny.

The committee recommended the ordinance be presented in an amended form, with some of its provisions separated out for implementation through rules rather than the law itself.

Taking into account the government's financial liabilities, depositors' and investors' interests, and the realities of the banking sector, a new Section 18(a) was inserted before the bill was tabled and subsequently passed as the Bank Resolution Act, 2026.

Section 18(a) was meant to introduce a market-based alternative alongside conventional resolution tools, allowing a bank under resolution to be restructured while remaining operational, addressing capital and liquidity shortfalls, protecting the interests of depositors and investors, and reducing the government's financial exposure.

However, no individual or institution applied under the section after fulfilling all its conditions, prompting the government to draft the "Bank Resolution (Amendment) Act, 2026" to repeal the provision altogether.

The cabinet has now granted final approval to the draft, subject to vetting by the Legislative and Parliamentary Affairs Division.