Beyond Core Banking: Why the Five-Bank Merger Needs an Institutional Transformation Plan

Bangladesh’s decision to combine five Islamic banks into one institution is not merely a banking-sector adjustment. It is an attempt to create a stable, trusted, and sustainable financial institution from five separate organisations with different histories, people, technologies, cultures, products, risks, and operating practices.

A merger of this scale can easily be misunderstood as a Core Banking System replacement project. Under such an approach, attention quickly moves toward selecting a CBS vendor, migrating customer data, connecting branches, and announcing an early go-live date.

A Bank Is More Than Its CBS

A Core Banking System processes accounts and transactions. It does not automatically create one unified institution.

Five banks may use one CBS and still remain divided in many important ways.

They may continue to have different:

·        Products and service rules

·        Account structures and customer definitions

·        Credit and investment policies

·        Shariah interpretations and approval practices

·        Financial and regulatory reporting methods

·        Risk-control standards

·        Cybersecurity responsibilities

·        Branch procedures

·        Employee roles

·        Customer-service practices

·        Data quality standards

·        Organisational cultures

Therefore, installing one CBS cannot by itself complete the merger.

The technology must support a clearly defined institutional model. Otherwise, the Bank may achieve a technical go-live while carrying unresolved organisational, operational, and control problems into the new institution.

The Danger of the Quick-and-Dirty Approach

Large transformation projects often face intense pressure to show visible progress.

This may encourage a quick-and-dirty approach:

Select the system quickly.

Move the data.

Connect the branches.

Start operations.

Resolve the remaining issues later.

Such an approach may appear faster and cheaper at the beginning. In reality, it can transfer unresolved problems into the live environment.

Incomplete product harmonisation may create inconsistent customer treatment.

Weak data reconciliation may affect balances, profit calculations, reporting, and audit confidence.

Unclear operational ownership may delay incident response.

Unaligned Shariah rules may create product and compliance disputes.

Poorly integrated channels may interrupt ATM, mobile banking, internet banking, agent banking, remittance, payment, and regulatory services.

The Bank may then spend years correcting decisions that should have been resolved before implementation.

Speed is important. But speed without structure can create permanent complexity.

First Define the Future Bank

Before selecting or finalising major technology decisions, the Board and management should define the institution they are trying to create.

This should include:

·        The target operating model

·        The unified product and service structure

·        The governance and authority model

·        The Shariah governance framework

·        The customer and account model

·        The financial and regulatory reporting architecture

·        The risk and control framework

·        The data-ownership model

·        The cybersecurity and resilience structure

·        The branch and digital-service model

·        The human-resource and organisational design

·        The transition and stabilisation plan

Only after these matters are sufficiently clear can technology be evaluated against the Bank’s real requirements.

The CBS should follow the institutional design. The institution should not be forced to follow the limitations of a hastily selected CBS.

Governance Must Connect Every Workstream

The merger will involve many connected workstreams.

These may include:

·        Legal and regulatory integration

·        Business-process harmonisation

·        Technology architecture

·        Data migration

·        Cybersecurity

·        Shariah compliance

·        Finance and accounting

·        Human resources

·        Customer communication

·        Branch and channel integration

·        Risk management

·        Vendor management

·        Cutover and operational stabilisation

If each workstream is handled separately, major gaps may appear between them. For example, a technology team may complete data migration without resolving product differences.

A business team may approve products without confirming system support.

A cybersecurity team may define controls without clear operational ownership.

A project team may declare go-live readiness without full reconciliation, rollback, or customer-service preparation.

This is why the programme needs one integrated governance structure, not a collection of isolated committees and vendors.

Independent Expertise Can Protect the Board

The Board remains responsible for the final decisions.

However, responsibility does not mean that the Board must independently possess every specialised capability required for the merger.

The Board can strengthen its decisions through structured multidisciplinary review involving experienced professionals from banking operations, Islamic finance, risk, cybersecurity, data management, enterprise architecture, programme management, organisational transformation, academia, and relevant regulatory institutions.

Such support does not weaken the Board’s authority.

It helps the Board make decisions that are informed, transparent, evidence-based, and defensible.

The purpose of independent expertise is not to delay the project.

It is to prevent avoidable mistakes while helping the project move faster with greater confidence.

Success Must Be Defined Properly

Success should not be defined only as:

·        Selecting a vendor

·        Signing a contract

·        Migrating the database

·        Connecting all branches

·        Completing the first transaction

·        Announcing a go-live date

These are milestones. They are not the final measure of success.

The real success of the merger will be demonstrated when:

·        Customers receive reliable and consistent service

·        Depositor confidence remains protected

·        Financial data remains accurate

·        Shariah governance is consistently applied

·        Regulatory reporting remains dependable

·        Employees understand their responsibilities

·        Cybersecurity and operational risks remain controlled

·        Products and processes operate under one coherent model

·        The institution can grow sustainably after the merger

The Real Decision

The central question is not simply:

Which CBS should the new Bank use?

The more important question is:

What kind of institution is Bangladesh trying to build, and what governance, operating model, technology, people, and controls are required to build it safely? The five-bank merger represents a rare opportunity. Handled properly, it can become a model of disciplined banking transformation. Handled merely as a software replacement, it may transfer five banks’ unresolved problems into one larger institution.

The future Bank must, therefore, be designed as one institution from the beginning. Technology should enable that transformation. It cannot substitute for it.

(The Author: Nurul Islam, Ex- MD & CEO of Jaiz Bank, Naigeira, and Ex DMD of Islami Bank Bangladesh PLC).