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Nine banks suffer Tk 194.67b capital shortfall in 2017

Two new ones grace the list of capital-deficient banks last calendar year to push up the shortage

Siddique Islam | March 28, 2018 00:00:00

Nine banks, six owned by government, suffered an aggregate capital shortfall worth over Tk 194.67 billion in the last calendar year mainly as their swelling classified loans took a toll.

Sources in the banking circles indicated a worrying feature of the syndrome as two more banks hit the list of capital-deficient ones during the third quarter of 2017.

The nine banks-four state-owned commercial banks (SoCBs) out of total six, three of 40 private commercial banks (PCBs) and two specialised banks (SBs)--were put on the list of capital-deficient ones, according to the central bank officials.

Of the two latest entrants, one is a SoCB and another one fourth-generation PCB.

In 2016, seven banks were suffering from capital shortfall worth Tk 153.04 billion.

The overall capital shortfall of the four SoCBs rose to Tk 88.53 billion as on December 31 last year from Tk 76.26 billion three months before.

However, the capital shortage of two specialized banks (SBs) stood at nearly Tk 85.90 billion in the fourth quarter (Q4) of 2017 in a rise from Tk 82.83 billion as on September 30, 2017.

The capital shortfalls of three PCBs amounted to Tk 20.24 billion in the Q4 from Tk 17.91 billion in the Q3 of 2017.

"The banks had kept aside more money from their capital for maintaining provisioning requirements against their classified loans," a senior official of the Bangladesh Bank (BB) told the FE while explaining the capital shortages of the banks.

Overall shortfall in provision against both classified and unclassified loans in the country's banking system jumped by nearly 24 per cent or Tk 12.97 billion in the last calendar year.

Nine banks out of 57 failed to keep requisite provisions against loans, particularly classified ones, in 2017 following higher classified loans along with conditional rescheduling of credits.

The volume of non-performing loans (NPLs) in the country's banking system jumped by 19.51 per cent or Tk 121.31 billion in the last calendar year despite close monitoring by the central bank.

The amount rose to Tk 743.03 billion as on December 31 last year from Tk 621.72 billion on the same day of the previous year, the BB data showed.

On the other hand, the overall capital-to-risk weighted-asset ratio (CRAR) of all banks rose to 10.83 per cent in the final quarter of 2017 from 10.65 per cent three month before following lower trend of NPLs, the central banker added.

He also said stronger recovery drives by the commercial banks and the rescheduling of loans pushed down the NPLs in the final quarter of 2017.

During the October-December period of 2017, the classified loans dropped by more than 7.0 per cent or Tk 60.04 billion to Tk 743.03 billion from Tk 803.07 billion in the Q3.

All PCBs' CRAR was found, on average, 12.52 per cent as on December 31 last while the CRAR of nine foreign commercial banks stood at 24.90 per cent.

However, the capital position of public banks is still a matter of grave concern, the BB official noted.

The CRAR of six SoCBs stood at 5.04 per cent as on December 31 last calendar while the CRAR of two SBs was in the negative territory at 35.45 per cent, the BB data showed.

However, the total regulatory capital of all banks rose to Tk 945.61 billion during October-December from Tk 901.01 billion three months ago.

Bangladesh started implementing the Basel-III standard for calculation of CRAR of all banks in Q1 of 2015 for consolidating stability in the banking sector.

Under a roadmap to comply with the Basel-III, the banks will have to maintain 11.875 per cent of CRAR in 2018. Finally in 2019, it will hit the desired level of 12.50 per cent.

Basel-III is a new global regulatory standard on banks' capital adequacy and liquidity as agreed by the members of the Basel Committee on Banking Supervision.

The third of the Basel Accords was developed in response to deficiencies in financial regulation revealed by the financial crisis of the late 2000s.

The Basel-III is set to strengthen bank capital requirements and introduce new regulatory requirements on bank liquidity and bank leverage.

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