Basel Pillar Ii: Risk-Weighted Assets
BB asks banks to take preparation to keep more capital
Bangladesh Bank has asked the scheduled banks to take preparation to keep more capital against their risk-weighted assets starting from the last quarter of 2014 or first quarter of 2015 to implement fully the BASEL II, said officials of the central bank and commercial banks. .
They said that the BB might implement the new regulation for banks’ capital basement under pillar II, or generally known as internal capital adequacy assessment process of BASEL II, the international standard of the banking.
The banks now require to maintain at least 10 per cent minimum capital requirement against their risk-weighted asset under pillar I of BASEL II.
The banks will have to maintain adequate capital, which is almost 15 to 20 per cent more than the existing capital requirement, when the new BB rule will be implemented, a BB official said.
Senior officials of the commercial banks told New Age on Sunday that the new capital basement would put the banks in a difficult situation as some of them had already faced capital shortfall in the last few quarters.
They said that the new capital basement will also hit the banks’ profit as they would have to maintain the capital from the operating profit.
As part of the BB move, the central bank has already organised a number of meetings on one-to-one basis with the banks since last week of December. The BB on Sunday held a meeting with Al-Arafah Islami Bank and it will continue one-to-one the meetings till January 30.
The banks are now maintaining the risk-weighted asset by calculating the market risk, credit risk and operation risk under pillar 1.
According to the latest BB data, 14 banks including seven private commercial banks failed to maintain their minimum capital requirement under pillar I.
The overall capital shortfall in the banking industry stood at Tk 9,888.66 crore against the required ceiling of Tk 60,217.18 crore as of September 30, 2013.
Against the backdrop, the government injected Tk 4,100 crore into four ailing state-owned banks — Sonali, Janata, Rupali and Agrani — as recapitalisation fund in the last week of December.
The BB has set eight types of risks to calculate the capital requirement under the ICAAP. The eight types of risks are residual risk, concentration risk, strategic risk, settlement risk, liquidity risk, reputation risk, and environmental and climate risk.
The central bank has taken the initiative in a bid to strengthen the banks’ financial health, he said.
The new capital basement will protect the depositors’ interest of the banking sector, he said.
‘Moreover, we will implement the BASEL III in the coming days. So, it is the most important to implement the full-fledged operation of the BASEL II in the quickest possible time’, he said.
Pubali Bank managing director Helal Ahmed Chowdhury, told New Age on Sunday that the new capital basement under the ICAAP would be important for the banking sector but it would create difficulty for some weak banks.
A number of banks are now struggling to stabilise their business due to the recent political turmoil, so the new capital basement will be a burden for them, he said.
‘Some banks have already faced in a capital deficit in the last few quarters. Under the circumstances, the weak banks are lagging behind to comply with the BB rules and regulations. But, all of banks will have to maintain the new capital basement to secure their financial health’, Helal said.
EXIM Bank managing director Mohammed Haider Ali Miah told New Age that the banking sector would initially face trouble in maintaining the adequate capital.
He, however, said that all banks would have to maintain the adequate capital as the BB would go to implement the BASEL III in the coming years.
BB deputy governor SK Sur Chowdhury said that all banks would have to maintain the new capital basement in the interest of their business.
The banks will ruin if they operate their business without capital, he said.
‘It is not justified that the banks will face crisis if they maintain the adequate capital’, he said.
-With New Age input
