Bangladesh has prepared a roadmap for starting implementation of the Basel-III framework for bank companies from July, 2014, in line with the global standard.
Under the roadmap, the central bank will issue guidelines for implementation of the Basel-III within April this year.
Besides, initiatives will be taken for capacity building of the banks on Basel-III issues during April to June this year.
The Basel-III implementation process will start from July, 2014. It will be implemented fully by January, 2019, according to the roadmap issued by the central bank Monday.
"Some banks may face extra pressure on capital requirements following implementation of the Basel-III framework," a senior official of Bangladesh Bank (BB) told the FE.
He also said the banks would have to set aside 0.625 per cent as capital conservation buffer by December, 2016, to avoid any unwarranted situation.
The banks must maintain 10.625 per cent as minimum total capital, plus capital conservation buffer, by December 2016 from the existing level of 10 per cent, according to the roadmap.
It will reach 12.50 per cent by January, 2019, in line with the roadmap, the central banker added.
The Basel-III is a new global regulatory standard on bank capital adequacy and liquidity, agreed upon by the members of the Basel Committee on Banking Supervision.
The third of the Basel Accords was developed in response to the deficiencies in financial regulation revealed by the late-2000s financial crisis. The Basel-III is set to strengthen bank capital requirements and introduce new regulatory requirements on bank liquidity and bank leverage.
"Liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) are the pros and cons of the Basel-III framework," the central banker explained.
He also said Bangladesh Bank would monitor the LCR and the NSFR from June, 2014, to June, 2015, on test basis. "We'll issue a fresh directive in this connection shortly," the BB official noted.
The LCR is a new liquidity standard introduced by the Basel Committee to ensure that a bank maintain an adequate level of unencumbered, high-quality liquid assets that can be converted into cash to meet its liquidity needs for 30 calendar days.
The NSFR is a longer-term liquidity monitoring tool.
Bangladesh is now implementing the Basel-II accord to consolidate capital base of the banks in line with the international standard.
It 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.
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