Dhaka, Bangladesh (BBN)- The central bank of Bangladesh will revise the guidelines on mapping of rating scale of the credit rating agencies with its grading system to make the international standard.
“We’ve taken the move aiming to facilitate the country’s entrepreneurs as well as banks through upgrading rating scale,” a senior official of the Bangladesh Bank (BB) said, adding that the central bank has already site with representatives of credit rating agencies for the first time in this connection.
Currently, four credit rating agencies – Credit Rating Information and Services Limited (CRISL), Credit Rating Agency of Bangladesh (CRAB), National Credit Rating Limited (NCRL) and Emerging Credit Rating Limited (ECRL) – are now operating in Bangladesh.
“We’ll revise the guidelines in line with the stakeholders’ opinions,” another BB official said, adding that the credit risk will be decreased to a great extent once the revised guidelines are implemented.
On August 3 this year, the central bank issued guidelines on risk based capital adequacy (RBCA) for banks in line with the Basel-II framework.
The risk based regulatory capital adequacy framework in line with Basel-II has fully come into force from January 01, 2010 replacing the previous approach for calculating capital adequacy of banks.
According to the guidelines, risk weighted asset (RWA) against credit risk is to be computed on the basis of credit rating conducted by an external credit assessment institutions duly recognised by the central bank.
Consequently, calculated RWA and capital adequacy ratio (CAR) will be reported as per specific reporting formats in line with the RBCA guidelines.
All the scheduled banks operating in Bangladesh may nominate any one or more rating agency (ies) for their own and counterparty credit rating for the purpose of calculating RWA against credit risk as per RBCA guidelines.
The Basel accord 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/SI/AD-27Nov10-7:20 pm (BST)