One manages to go out as another moves in

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Siddique Islam
Bangladesh Bank (BB) is monitoring the performance of 11 private commercial banks (PCBs) that are over-exposed either to stock market or to a single borrower.
These PCBs have been identified since June this year as vulnerable to credit risk for exceeding the permissible limits relating to their investment in stock market or exposure to a single borrower, central bank officials said.
Of them, one PCB came out of the list in October through slashing its investment in the capital market, but another PCB was added the same month after it crossed single borrower exposure limit for financing its subsidiary.
"We're now monitoring the performance of the banks in line with the action plans, which have been submitted to the central bank by the banks concerned," a senior official of the Bangladesh Bank (BB) told the FE Saturday.
He also said the central bank will sit with the newly added PCB this week to know about how it had exceeded such limit.
"All the 11 PCBs will have to bring down their over-exposure within the prescribed limits by November this year," the BB official said, adding that it would be possible to comply with the rules and regulations without disturbing the share market.
"It is good news that the banks have cut their investment in the capital market gradually," he said, adding that the banks would be able to bring down their holding of securities and exposure within the prescribed limits by the deadline.
Under the provisions, banks are allowed to invest not more than 10 per cent of their total liabilities in the capital market.
The central bank has taken measure to improve credit risk management of the banks through complying with the single borrower exposure limit provisions properly, the BB officials added.
Under the existing provisions, the total outstanding financing facilities by a bank to any single person or enterprise or organisation of a group will not at any point exceed 35 per cent of the bank's total capital subject to the condition that the maximum outstanding against fund based financing facilities (funded facilities) does not exceed 15 per cent of the total capital.
On November 1 last, the central bank asked all commercial banks to consider their subsidiaries - brokerage houses and merchant banks - under the same group to minimise credit risk.
The BB has made the move against the backdrop of violation of the existing single borrower exposure limit provisions by some of the banks that considered their subsidiaries as separate entities while financing them.
However, in case of the export sector the single borrower exposure limit should remain unchanged at the existing 50 per cent of the bank's total capital. But funding facilities in case of export credit will also not exceed 15 per cent of the total capital.