Banking sector shows rising capital strength

Posted by BankInfo on Sun, Aug 31 2014 12:04 pm

Banking sector showed rising capital strength with a weighted average core capital adequacy ratio of 10.68 percent at the end of June.

The level of capital adequacy was well above the 8.0 percent risk-weighted assets, stipulated in the Basel-II regulations.

The latest Bangladesh Bank (BB) data showed the capital requirement that banks should maintain as a regulatory obligation was Taka 63,694 crore or 10.68 percent of their total capital at the end of June this year.

The amount of the risk-weighted assets rose by 138 percent in the past five years, demonstrating a strong fundamental and low risk of the country’s banking sector, a BB official told BSS.

He said the amount of the risk-weighted assets was Taka 26,713 crore in 2009 when the central bank adopted the Base-II regulations, a global standard that banks should follow to maintain a certain level of cash reserve to fence off operational risk factors.

“The higher cash reserve reflects the higher capacity of banks to absorb shocks from operational and other losses,” the official said.

The higher capital adequacy of banks has been attributed to the prudent policy support, strict monitoring and effective training of staff of the central bank as well as commercial and specialized banks.

Cutting the time limit for classifying bad loans from six months to three months also helped a lot to bring down the amount of bad loan, which eventually strengthened the capital base.

“The banking sector also posted a stable performance in the past few years, with the non-performing loan ratio capped at a relatively low level,” the BB official said. 

News:Daily Sun/31-Aug-2014

BASIC warned not to repeat banking failure

Posted by BankInfo on Sat, Aug 30 2014 12:44 pm

The instructions came at an orientation meeting that Bangladesh Bank held with the BASIC Bank board of directors yesterday at its headquarters in the capital

Bangladesh Bank Governor Atiur Rahman has instructed the BASIC Bank new board of directors to remain vigilant from the outset in a bid to restoring goodwill of the bank.

He also warned the board members that the government and the central bank no longer want to see the repetition of banking failure.

The instructions came at an orientation meeting that Bangladesh Bank held with the BASIC Bank board of directors yesterday at its headquarters in the capital. 

Criticising the previous board, the governor said the bank went through a troublesome situation due to their sheer irresponsibility of management and lending and non-compliance with the rules.

As a result, Bangladesh Bank and the Finance Ministry had to take strong action against them, he said. 

He asked the board to submit the restoration plan, following the central bank instruction. 

The board was also asked to follow prudent guidelines, remain active in monitoring and recovering loans, mete out exemplary punishment to corrupt officials and follow an appropriate policy for promotion. 

He said the central bank has taken some long-term preventive actions in the wake of recent serious violations of loan disbursement.

The disbursement was made capitalising on the weakness of corporate governance and financial management. 

He called upon the board to strengthen the bank’s loan discipline, internal audit and controlling frameworks. 

The last five-year capital growth rate in the banking sector is 139% which indicates the ability of  risk management, but it is not true for all banks, the governor said, referring to the capital shortfall of BASIC. 

The bank suffered the capital shortfall of Tk1372 crore in June this year, and the central bank asked it to make up the shortfall amount by June 2015. 

The central bank recently signed a memorandum of understanding with the BASIC bank, setting out a series of conditions. 

The BASIC board was instructed to bring down its classified loan to 15% by June 2015 of its total outstanding loan which was 40.77% as of June this year.

News:Dhaka Tribune/30-Aug-2014


MD pick for state banks likely to be delayed

Posted by BankInfo on Sat, Aug 30 2014 12:33 pm

The banks yesterday sent letters to the Division seeking its representatives for three-member committees

The appointment of managing directors to state-run banks might be delayed by two months as search committees were yet to be formed, said an official at Bank Division.

Janata Bank and BASIC Bank sought members to Bank and Financial Institutions Division to form search committees for MDs.

The banks yesterday sent letters to the Division seeking its representatives for three-member committees, said official sources.

As per the government decision, five state-owned banks will form three-member committees to search for “non-political” MDs. Each of five committees will have a representative from Bank Division.

In a circular, the Bank Division asked the state-owned banks this month to formulate three-member search committees.

The state-owned banks are Sonali, Janata, Agrani, BASIC and Bangladesh Development Bank Limited.

As per the circular, the committee will select three candidates for MD post and send the selections to the Bank Division. The division will pick one from them for appointment.

The bank will seek consent from Bangladesh Bank for the final selection before appointing.

Some of the existing and former MDs the state-owned banks havestarted lobbying to get back the jobs,said a high official of the Banking Division.

News:Dhaka Tribune-30-Aug-2014

Banking sector can contribute better to country’s development: Economists

Posted by BankInfo on Sat, Aug 30 2014 11:16 am

The country’s banking sector can contribute to the country’s inclusive development in a greater way if it could be made competitive, effective and transparent, removing the existing problems, said leading economists. “The prevailing problems are identified. Necessary steps need to be taken to remove the problems as quickly as possible to ensure banking sector’s better contribution to development process,” Director General of the Bangladesh Institute of Development Studies (BIDS), Mustafa K Mujeri, told UNB. Evaluating the overall situation in the banking sector, Mujeri said he does want to term the current situation a ‘crisis’ but acknowledged problems like increase in non-performing loans and problems relating to credit disbursement, reports the news agency. Acknowledging it, AB Mirza Azizul Islam said the situation in the banking sector is not that much satisfactory with the increase in classified loans, slower economic activities and lower demand for credit.Mirza Aziz, a former caretaker government adviser, however, said there is no such situation for which one can claim that the banking system is going to collapse. On recent scams in the sector, Mujeri said the government and the central bank have taken a number of initiatives to overcome the situation but most of the steps are yet to be implemented.Expressing dismay over the delay in punishing the offenders, Mujeri said, “This doesn’t give the right signal, it rather creates confusions and suspicions among people.”“Others will get a massage that nobody will be spared if the responsible persons are punished timely and quickly for their wrongdoings. But if there is any delay, people will get prompted to repeat the offence,” said the economist.Mujeri thinks proper punishment for those who are found guilty will have to be ensured very quickly if the government and the central bank want to restore discipline in the banking sector.Responding to a query, Mirza Aziz said the steps taken so far relating to scams are not enough. “I don’t think these are enough.”On Sonali Bank’s scam, he said no remarkable step was taken over the bank board though the Bangladesh Bank clearly mentioned the board also had responsibility to that end.Mirza Aziz, however, said the irregularities that took place are past now, and hoped there would be no repetition of such irregularities.The central bank has said it is alert and strengthened its supervision and inspection systems.About the formation of banks’ governing bodies, Mujeri said the board is highest policymaking body of a bank where experienced people with adequate knowledge on bank management and its operations must be there to run it efficiently.“It’s not important whether the person is political or non-political one. But he must be experienced and must have clear idea about the operation of a bank and capability to contribute to the bank positively.But it won’t be wise for the bank if someone gets appointed only under political consideration,” he added.

News:The Independnt/30-Aug-2014

Banks' capital base crosses 10pc requirement

Posted by BankInfo on Sat, Aug 30 2014 10:58 am

The capital base of banks has swelled well above 10 percent of risk-weighted assets, a regulatory requirement, data from Bangladesh Bank shows.

Capital that banks should hold against their risk-weighted assets rose to Tk 63,694 crore or 10.68 percent at the end of June. The amount was Tk 26,713 crore in December 2009 when Bangladesh introduced Basel-II, an international standard that requires financial institutions to maintain enough cash reserves to cover risks.

“The rise in capital between December 2009 and June 2014 is 139 percent. Banks' ability to absorb losses against risks has strengthened,” BB said in a statement yesterday.

The BB said the quality of banks' assets has improved due to stricter rules in classifying bad loans. Loans will be defaulted if borrowers fail to pay back the money for consecutive three months instead of earlier six months.

Banks' profit before tax and provision surpassed Tk 10,000 crore in the six months through June, compared to Tk 18,000 crore in full-year profits of 2013, according to the statement.

Banks have adequate liquidity and there is no pressure for money in the overnight call money market, the central bank said.

Foreign exchange reserves crossed $22 billion, which is equivalent to seven months' import payments. Healthy reserves have prompted the central bank to raise the Export Development Fund to $1.5 billion from $1.2 billion.

News:Daily Sun/30-Aug-2014


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