Dhaka, Bangladesh (BBN) – The central bank of Bangladesh is going to use the latest technique by revising the CAMELS rating calculation method to get the exact picture of the country’s commercial banks’ financial health, officials said.
 
“The central bank is now working to introduce a new set of guidelines on calculation of the CAMELS rating from June next. It is being done in a bid to consolidate the banks’ capital base in view of the ongoing global financial meltdown,” a senior official of the Bangladesh Bank (BB) told BBN in Dhaka on Thursday.
 
“We expect that the new CAMELS rating calculation will help mitigate the financial risks through improving the banks’ shock absorbance capacity,” he noted.
The CAMELS (Capital, Assets, Management, Earnings, Liquidity and Sensitivity to market risk) rating is a tool used to identify those banking companies which have problems and require increased supervision.
 
A good number of off-balance sheet items including letters of credit, inland bill purchase (IBP), foreign bill purchases (FBPs), loans against trust receipts (LTRs), payment against documents (PADs) and loan against imported merchandise (LIM) will be considered in determination of the CAMELS rating along with the existing balance sheet items.
 
The BB will include such off-balance sheet items in the revised CAMELS rating method to assess the actual risk of a bank, according to the BB officials.
 
Currently, a nine-member high-powered committee, headed by BB Deputy Governor Abu Hena Mohammad Razee Hassan is now working to revise the guidelines.
Another Deputy Governor of the BB, Mr SK Sur Chowdhury, is an adviser to the committee, according to the BB officials.
 
Under the existing CAMELS rating method, any bank, categorized as marginal or unsatisfactory, is generally identified as a problem bank. Activities of these banks are closely monitored by the BB.
 
Two private commercial banks (PCBs) have been categorized as ‘problem banks.’ They have been asked to submit special reports on a quarterly basis so their real financial position can be reviewed.
 
As per the existing provisions, the problem banks have to follow specific guidelines in addition to normal banking rules and regulations to improve their financial health.
 
The central bank earlier had introduced the Early Warning System (EWS) of supervision from March 2005 to address the difficulties faced by banks in any of the areas of CAMELS.
 
Any bank found to have faced difficulty in any area of operation, is included in the Early Warning category and monitored very closely to help improve its performance.
 
Currently a PCB is monitored under the EWS. 
 
BBN/SSR/AD-22Mar13-11:29 am (BST)