Bangladesh’s banks capital base improve significantly in Q4

Last updated: February 23, 2015

Dhaka, Bangladesh (BBN) - Bangladesh’s banking sector capital base improved significantly in the final quarter of the calendar year 2014 as provisioning shortfall decreased following a sharp fall in classified loans, officials said.

The total eligible capital, generally known as actual capital of the country’s banking sector, rose by more than 10 per cent to BDT 717.54 billion during the October-December period of the last calendar year from BDT 649.33 billion in the previous quarter, according to the central bank statistics.

Talking to BBN, a senior official of the Bangladesh Bank (BB) said the capital base of banking sector improved significantly as provisioning shortfall decreased during the period under review following a sharp fall in non-performing loans (NPLs).

All banks’ provisioning shortfall came down to BDT 7.96 billion in the Q4 of the last calendar year from BDT 28.96 billion in the preceding quarter while the amount of NPLs fell by more than 12 per cent to BDT 501.56 billion from BDT 572.91 billion.

The BB official also said loan recovery and recapitalisation also contributed to the improvement of the overall capital base.

On the other hand, the overall capital adequacy ratio (CAR) of all banks rose to 11.35 per cent in the Q4 of the last year from 10.57 per cent a quarter ago.

The overall capital surplus of the banking sector stood at BDT 40.69 billion in the Q4 up from the BDT 10.96 billion capital shortfall in the previous quarter, the BB data showed.

Two state-owned commercial banks, two private commercial banks (PCBs) and two development finance institutions (DFIs) were on the list of those facing the capital shortfall during the Q4, the central banker added. “The six banks have faced a shortfall of capital mainly due to the higher volume of their classified loans.”

The BB earlier fixed the CAR at minimum 10 per cent considering the country’s overall risk factors in the banking sector.
Under the Basel-II provision, the standard requirement of CAR is minimum 8.00 per cent.

Bangladesh is now implementing the Basel-II accord to consolidate the capital base of banks in line with the international standards.

It has been prepared on the basis of three pillars: minimum capital requirement, supervisory review process and market discipline.
Three types of risks – credit risk, market risk and operational risk – have to be considered under the minimum capital requirement.

BBN/SSR/AD-23Feb15-10:47 am (BST)

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