Bb’s Financial Stability Report For 2012
Volatile stocks, bank scams destabilise financial sector
The Bangladesh Bank on Sunday said the stability of the country’s financial sector was adversely affected by the capital market volatility, financial scams in the banking sector, and declining trend in the real GDP growth. The BB presented the observations in its financial stability report for 2012 that was disclosed at the central bank headquarters in the capital.The report also found that the capital adequacy ratio in the country’s banking sector was far below than that of South Asian countries like India, Sri Lanka and Pakistan.
BB governor Atiur Rahman disclosed the report while managing directors and chief executive officers of all banks and senior executives of the central bank attended the programme.
Atiur claimed that the country’s banking sector was now more resilience than the neighbouring countries as the financial inclusion has recently got tempo amid an increased trend in opening of new accounts with the banks.
He said, ‘We have to keep importance to develop the good governance in the sate-run banks including private commercial banks on a priority basis in a bid to stabilise the financial sector. The BB has already issued guideline with detailed directions in this regard. But, implementation of the guideline is not satisfactory in all cases. The board of directors and high officials of banks should need to show appropriate attitude to bring a reassuring situation on the issue.’
BB deputy governor SK Sur Chowdhury after the meeting told reporters that the BB financial stability report had kept importance on some factors that affected adversely the financial system in the last year.
The capital market is still demonstrating price correction with lack of confidence of market participants that might put an adverse impact on the country’s macro-economic situation, he said.
Some financial soundness indicators of the banking sector, such as profitability, capital adequacy ratio and defaulted loan ratio recorded deteriorations in 2012 which
put a negative impact on the financial stability, he said.
Besides, recurrence of various scams at financial institutions, particularly at banks, led to confidence problem in the financial intermediaries, he said
The country’s declined GDP growth ratio also created a negative impact on the financial stability in the last year, he said.
The BB report said that the country was far away to keep CAR in accordance with India, Sri Lanka and Pakistan.
Any scheduled banks have to keep at least 10 per cent CAR against its risk-weighted assets.
The BB report showed that the CAR in the country’s banking sector was 9.3 per cent in 2010 while India kept 14.60 per cent, Pakistan 14 per cent, and Sri Lanka 14.9 per cent.
The CRR of the country’s banking sector was 11.4 per cent in 2011 while India was able to keep 13.5 per cent, Pakistan 14.1 per cent and Sri Lanka 14.5 per cent.
The country’s CRR in 2012 was 10.5 per cent against 14.3 per cent CRR in India. The report, however, did not refer the CRR situation in Pakistan and Sri Lanka in 2012.
Sur said that the central bank’s financial stability report had placed some suggestions to maintain the stability in the financial sector.
The insurance companies should introduce risk-based capital adequacy framework in line with Basel-2 and to develop risk management framework, he said.
Banks should strengthen their internal control framework and to improve capital base, profitability and other soundness indicators, he said.
The BB report also placed some suggestions for the financial regulators saying that the central bank should introduce a consolidated supervision in the banking industry.
Various regulators of financial intermediaries should strengthen cooperation among themselves, the report said
Sur said that it was not positive indicator that the bad and doubtful loan was now 67 per cent of the overall classified loan in the banking sector.
He said that they would try to shift the ratio in to the classified loan in the sub-standard category.
‘The defaulted loan situation in the banking sector will change much if the defaulted loan in the five state-run banks decreased. The five banks held 63 per cent defaulted loan of the banking sector in 2012.’
The five banks are Sonali Bank, Janata Bank, Agrani Bank, Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank, according to the BB data
The five banks held defaulted loan amounting to Tk 26,786.47 crore, or 63 per cent of total defaulted loan Tk 42,725.51 crore in the banking sector in 2012
Asked what steps the BB has taken against the banks which did not comply with the guideline, SK Sur said all banks in any country could not be able to follow the rules accurately.
He, however, said that the BB had already taken punitive actions against the officials of the scheduled banks who failed to follow the rules issued by the central bank.
Association of Bankers, Bangladesh chairman Nurul Amin said that 10 to 15 corporate houses located in Chittagong were now single largest borrowers with some banks.
He said, ‘I am shocked that some of the loans have already plunged into defaulted situation which may put an adverse impact on the financial sector. The BB should discuss with the companies on one-to-one basis for the greater interest of financial stability in the country.’
-With New Age input
