Banks\' capital base rises slightly in Q3

Siddique Islam | Published: December 08, 2015 00:00:00 | Updated: February 01, 2018 00:00:00

Overall capital base of the country's banking sector increased substantially in the third quarter of this calendar year save big shortfalls in some 'badly-managed' banks.
Official statistics show mainly a few state-run ones are among the banks badly managed as regards monetary matters, including balance between their capital positions and advancing loans.
Total regulatory capital--generally known as actual capital of the country's banking sector--rose more than 6.0 per cent to Tk 727.20 billion during this July-September period. The amount was Tk 682.31 billion in the previous quarter, according to the central bank's latest statistics.
"A few banks have already issued subordinated debt bonds to raise their capital bases," a senior official of the Bangladesh Bank (BB) told the FE Monday, explaining the main reason for rise in the actual capital of the banks. Â
The banks are now allowed to raise their capital through issuing such debt instrument, generally known as subordinated bond, instead of issuing right and bonus shares.
Such subordinated debt is a financial instrument which is treated as a supplementary capital, generally known as tier-2 or additional supplementary capital, generally known as tier-3, the central banker explained.
He also said a favourable business environment, after the political turmoil in the Q1 of this calendar year, helped raise banks' overall capital base.
"We're now working to improve the capital base in the banking sector further in the fourth quarter of this calendar year," the central banker noted.
On the other hand, the overall capital shortfall of the banking sector came down to Tk 438.7 million in the Q3 from Tk 22.58 billion in the previous quarter.
Nine commercial banks out of 56 faced a shortfall in capital in the Q3 of 2015, mainly due to their higher volumes of non-performing loans (NPLs), according to the BB official.
Four state-owned commercial banks (SoCBs), three private commercial banks (PCBs) and two specialised banks (SBs) were on the list of cash-strapped banks.
"Higher NPLs have led to a rise in provisioning requirements, which ultimately prompted their capital shortfall," the BB official explained.
The amount of classified loans rose more than 4.0 per cent to Tk 547.08 billion during the Q3 of this year from Tk 525.19 billion in the preceding quarter. It was Tk 546.58 billion in the Q1 of 2015.
However, capital-to-risk weighted assets ratio (CRAR) under Basel-III of all banks rose to 10.53 per cent in the Q3 of 2015 from 10.27 per cent three months before, the BB data showed.
The six SoCBs had CRAR of 6.20 per cent, the PCBs 11.97 per cent, foreign commercial banks (FCBs) 24.27 per cent and the two SBs minus 27.99 per cent.
Bangladesh started implementing the Basel-III standards in calculation of CRAR from the Q1 of this calendar year aiming to consolidate the stability in the banking sector, another central banker said about the healing measures.
The BB earlier fixed the CRAR at minimum 10 per cent considering the country's overall risk factors in the banking sector.
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