UAE cenbank asks Janata to appoint administrator by mid-Aug for winding down operations

The directive was issued in a letter dated 15 July to Mohammad Kamruzzaman, chief executive officer of Janata Bank’s UAE operations. The Business Standard has seen the letter.

Kamruzzaman subsequently forwarded the letter to Janata Bank Managing Director Md Mazibur Rahman, seeking guidance on the next course of action.

Under the UAE central bank’s instructions, Janata Bank must appoint an administrator within 30 days of the issuance of the letter.

Janata Bank has operated in the UAE since 1976 and currently maintains four branches in Abu Dhabi, Dubai, Sharjah, and Al Ain.

The branches primarily provide remittance services to Bangladeshi expatriates, alongside deposit-taking, trade finance and other banking services.

Capital shortfall prompts wind-down order

Under UAE banking regulations, Janata Bank’s operations there are required to maintain a paid-up capital of 400 million dirhams. The branches currently have a paid-up capital of 100 million dirhams, leaving a shortfall equivalent to about Tk1,000 crore at an exchange rate of Tk33.50 per dirham.

The UAE central bank had previously warned that failure to address the capital shortfall could lead to the closure of the bank’s operations, saying inadequate paid-up capital increased the risk to depositors’ funds.

According to the regulator’s latest letter, an earlier communication sent on 8 July highlighted serious concerns about the financial condition of the Janata Bank group and breaches of the minimum capital requirements. The latest directive follows earlier correspondence between the two sides in April and May.

Administrator to oversee closure process

The appointed administrator will be responsible for preparing and implementing a detailed wind-down plan covering the settlement of liabilities, management of loans and other obligations, protection of depositors’ interests, phased decommissioning of information technology infrastructure and the closure of branch operations.

The plan must have a maximum implementation period of three years and be submitted to the UAE central bank for review. The administrator will also be required to submit regular progress reports, including updates on key developments and challenges, to the Banking Supervision Department.

The regulator also instructed Janata Bank to submit weekly reports in a prescribed format and formally notify correspondent banks and key business partners of the planned wind-down of its UAE branches.

Before issuing the latest directive, the UAE central bank had already imposed several supervisory restrictions on Janata Bank’s four UAE branches, including a ban on opening new accounts, restrictions on withdrawals from its account maintained with the central bank and instructions to prepare for a phased wind-down if the capital deficiency remained unresolved.

Janata Bank seeks more time

Speaking to TBS yesterday, Managing Director Md Mazibur Rahman said the paid-up capital requirement for Janata Bank’s UAE branches had originally been 40 million dirhams before it was increased to 400 million dirhams in 2021.

He said all four UAE branches remained profitable and that the bank had been using retained earnings to gradually reduce its capital shortfall, an approach that had continued until now.

Mazibur said the UAE authorities are now insisting that the entire capital requirement be met at once, adding that “there may also be some geopolitical considerations” behind the latest position.

He said Janata Bank had informed the secretary of the Financial Institutions Division and the governor of Bangladesh Bank about the matter. According to Mazibur, the Bangladesh Bank governor has already written to the governor of the UAE central bank seeking more time.

“We hope they will give us some more time. If the government supports the remaining paid-up capital requirement, we believe a solution can be reached. The government is also aware of the issue,” he said