Comprehension
Merger and Acquisition of Banking operations in Bangladesh
Merger and acquisition (M&A) is a significant strategy in the financial sector,
especially in the banking industry. In Bangladesh, M&A has become more relevant
in recent years due to increased competition, weak governance in some banks,
rising non-performing loans (NPLs), and pressure from the central bank to
strengthen the banking system.
A merger happens when two banks combine to form a single institution, These
processes help banks to grow quickly, improve their financial health, expand
customer base, and reduce operational costs. In Merger, Name of Newly formed
entity is usually renamed taking the name (partly) from both entities.
An acquisition occurs when one bank takes over another. An acquisition is defined
the act of becoming the owner of certain property; acquiring or procuring the
property of other institutions, taking with or without consent, especially a material
possession obtained by any means.
In Bangladesh, the Bangladesh Bank plays a key role in regulating and approving
any merger or acquisition. It often encourages weak or poorly performing banks to
merge with stronger ones to protect depositors and stabilize the banking sector.
Bank Asia acquired the business operations of the Bank of Nova Scotia in Dhaka in
2001, first of its kind in the banking history of Bangladesh. It again acquired the
Bangladesh operations of Muslim Commercial Bank Ltd (MCB), a renowned Pakistani
bank.
Statndadrd Chartered acquired Grindlays Bank from ANZ in August 2000,
significantly expanding its presence in South Asia, particularly in Bangladesh. This
acquisition, finalized on August 1, 2000, provided standard Chartered with an
operational history in Bangladesh dating back to 1905, according to Standard
Chartered Bangladesh. The acquisition transformed Standard Chartered into the
largest foreign Bank.
Though M&A can bring efficiency, it also involves challenges like job losses, cultural
mismatches, and technical integration issues. Therefore, careful planning and
regulatory oversight are essential for successful mergers in the banking sector.
Q-1: Mention the difference between “Merger” and “Acquisition”
a) A merger occurs when two separate entities combine forces to create a new
Joint organization.
b) Merger is voluntary, but acquisition may not be voluntary in all cases.
c) Acquisition refers to takeover one entity by another entity.
d) All of the above.
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Q-2: Which was the 1st Acquisition case in Bangladesh?
a) Muslim Commercial Bank acquired by Bank Asia was the 1 st Acquisition case
in Bangladesh
b) Grindlays Bank acquired by Standard Chartered was the 1 st Acquisition case
in Bangladesh
c) Al Falah Islami Bank taken over by Bank Asia was the 1 st acquisition case in
Bangladesh
d) All the above cases were the 1st acquisition case in Bangladesh
Q-3: Is “Merger and Acquisition” necessary for Banks operating in Bangladesh?
a) No, as one entity losses independence by “Merger and Acquisition”
b) Yes, for operational efficiency, asset quality, good governance “Merger and
Acquisition” is necessary.
c) Merger brings “Win-Win” and Acquisition brings “Win-Loss”
d) None of the above 3
Q-4: How many Bank’s operation in Bangladesh so far acquired by Bank Asia PLC?
a) 03 Banks, Muslim Commercial Bank, Novascotia and Soceity General
b) 02 Banks, Muslim Commercial Bank and Novascotia
c) 03 Banks, Muslim Commercial Bank, Novascotia, Bank AL Falah
d) 04 Banks, Muslim Commercial Bank, Novascotia, Society General and Bank
AL Falah
Q-5: What are the challenges of “Merger and Acquisition”?
a) “Merger and Acquisition” may invite job Cut
b) cultural mismatches may develop after “ Merger and Acquisition”
c) New Entity may face Regulatory adversities after “ Merger and Acquisition”
d) All of the above.
Q-6: “Merger and Acquisition” is widely talked about, as
a) Banking industry is strong and sustainable.
b) Profitability, Liquidity and asset quality of some banks became under
question
c) Good Banks want to expand their Balance Sheet
d) Number of Banks are huge in Bangladesh
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