Most of the state-owned commercial banks (SoCBs) are set to face the central bank's wrath today (Thursday) as their capital shortfalls swelled due to multiplying default loans, officials have said.
"We're going to voice a hard message for the SoCBs due to their poor performances in containing the volumes of default loans and addressing other issues," a senior official of the Bangladesh Bank (BB) told the FE on Wednesday.
He said the central bank would review their performances in line with the memorandums of understanding (MoU) the four SoCBs signed earlier to improve their financial health with fit policy supports.
The capital shortfalls of Sonali Bank, Janata Bank, Agrani Bank and Rupali Bank rose to an aggregate amount of Tk 14.41 billion in the second quarter of this calendar year (CY). The amount was Tk 2.40 billion in the previous quarter.
The capital adequacy ratio (CAR) of the SoCBs came down to 8.65 per cent, as of June 30, from 9.77 per cent on March 31 last. It was 10.81 per cent in the last quarter of 2013.
The central bank earlier had fixed the CAR at minimum 10 per cent as part of the preparation for implementing the Basel-III in the banking sector in 2014, another BB official said.
Under the Basel-II rules, the standard requirement of the CAR is minimum 8.00 per cent.
Bangladesh is now implementing the Basel-II accord to consolidate the capital base of banks in line with the international standards.
It has been prepared on the basis of three pillars: minimum capital requirement, supervisory review process and market discipline.
Three types of risks - credit, market and operational risks - have to be considered under the minimum capital requirement.
During the April-June 2014 period, the total amount of default loans with the SoCBs rose to Tk 197.19 billion from Tk 186.89 billion in the first quarter of this year, according to the central bank statistics.
Besides, the central bank at the review meeting today will instruct the SoCBs to take necessary measures for properly implementing the existing core risk guidelines to minimise their financial risks.
The BB earlier identified six core risk areas in the country's banking sector. The risk factors are: credit, asset and liability, foreign exchange, information technology, internal control and compliance, and money laundering.
Different issues, including recovery position of default loans, liquidity situation, credit growth, operating expenses and cost of funds, are expected to be reviewed at the meeting.
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