Weak markets to worsen job losses after merger, liquidation

The merger and liquidation of financial institutions are set to cost hundreds of jobs, while weakened money and capital markets leave little scope for new employment to replace those lost.

Although the central bank has assured that there will be no job cuts arising directly from the merger of five troubled banks, market analysts warn that employment losses across the broader financial sector are unavoidable.

Salim Afzal Shawon, head of research at BRAC EPL Stockbrokerage, said no institutional restructuring comes without consequences and that a negative impact on jobs is inevitable. "Any transformation leaves an imprint, and this one will be no exception, he said.

Bangladesh Bank has decided to liquidate nine non-bank financial institutions (NBFIs) following the bank merger process. These include FAS Finance, Bangladesh Industrial Finance Company, Premier Leasing, Fareast Finance, GSP Finance, Prime Finance, Aviva Finance, People's Leasing, and International Leasing..

According to Shawon, all parent companies along with their subsidiaries and associate entities-such as merchant banks, brokerage houses and asset management firms-will cease to exist. "As a result, all employees of those organisations will lose their jobs, creating a dent in the sector," he said.

Sector insiders estimate that more than 300 employees across the NBFIs, their subsidiaries and associate companies will be rendered jobless due to liquidation.Personal Finance Advice

Job losses are unlikely to remain confined to these institutions alone, as weakened investor confidence and eroding depositor trust have already constrained employment generation across the financial ecosystem. Several intermediaries are struggling to stay afloat and face possible closure unless market conditions improve.

Brokerage firms, for instance, are incurring losses as the secondary market continues to suffer from a prolonged bearish trend. "It's not possible to survive in a market with a turnover of only Tk 4 billion," Shawon said, adding that no brokerage firm is currently operating at breakeven.

Merchant banks are facing similar stress, as persistently low equity turnover has made it difficult for them to cover operating expenses. Many have already scaled down operations.

Market participants point out that several of the troubled institutions were financially sound even a decade ago, but irregularities, mismanagement and large-scale scams-unchecked during the previous regime-gradually weakened them.

International Leasing offers a case in point. Listed in 2007, the company performed well until 2015 before becoming entangled in loan scams involving Proshanta Kumar Halder, widely known as PK Halder, and his associates. A central bank investigation in 2019 found that nearly Tk 10 billion had been siphoned off from the company alone through loans taken in the names of shell entities.

Eight of the nine NBFIs slated for liquidation are listed companies, with multiple subsidiaries and associate firms operating in the capital market.

For employees, the uncertainty is already palpable. "We don't know what is awaiting us," said Dipannita Dey, in-charge of the principal branch of FAS Finance, which currently employs 35 staff members.

The president of the DSE Brokers Association, Saiful Islam, said employment growth in merchant banks and brokerage firms has already turned negative. He added that life insurers and several banks-apart from the five merged entities-are also undergoing severe financial distress.

"The problem is not over; rather, it will prolong unless massive regulatory reforms are enforced to restore stability in the equity market," he said.

The central bank governor has said liquidators will be appointed at each financial institution to assess assets and liabilities and sell recoverable loans, properties and investments, with proceeds distributed among depositors.

However, there is little scope to avoid job cuts at the nine NBFIs, as their liabilities exceed assets, making it nearly impossible to ensure employee benefits during liquidation.

Industry insiders say the bleak outlook in the capital market makes re-employment difficult for displaced workers. Unless the equity market rebounds, job prospects for affected employees will remain limited.

Sumit Puddar, secretary general of the Bangladesh Merchant Bankers Association, said equity trading alone cannot lift market turnover. Banks are holding large idle funds, much of which are invested in Treasury bonds.Trade Fair Guide

Policies encouraging banks to purchase such bonds through the capital market could help boost turnover, he said, adding that more quality investment instruments must be introduced.Trade Fair Guide

Saiful Islam echoed the concern, warning that the situation could deteriorate further without coordinated support from across the financial ecosystem. "We have enough rules and regulations, but rules alone will not run the market," he said, stressing that investor confidence hinges on higher turnover and a steady supply of quality shares.

He questioned why profitable entities such as Central Depository Bangladesh Ltd. and successful hotel businesses remain unlisted, while loss-making state-run firms are already in the market. "The problems will not be solved unless daily turnover reaches at least Tk 20 billion," he said, urging regulators to engage all stakeholders urgently to restore confidence.

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