22 banks join Basel-II regime, others poised to sign deal

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FE Report
Twenty-two banks have already complied with the minimum capital requirement of Basel II accord as Bangladesh Bank (BB) strives to develop a sound financial system in the country.
"We are regularly consulting with the banks to make them prepare for the accord," KM Abdul Wadood, member-secretary of Basel II coordination committee of Bangladesh Bank, said while speaking at a seminar in the capital Monday.
Credit Rating Agency of Bangladesh (CRAB) and Association of Bankers of Bangladesh (ABB) jointly organised the seminar titled 'Causes & Effects of the Financial Crisis & Responses of Basel Committee on Banking Supervision'.
Former finance adviser Mirza Azizul Islam, Policy Research Institute (PRI) chairman Zaidi Sattar and chief executive of Ekra Group Limited, an India-based credit rating agency, PK Chowdhury, spoke on the occasion while ABB president Mahmud Sattar moderated the seminar.
Full implementation of Basel II will benefit both - the banks and their clients, Mr Wadood said adding, "Many problems will be resolved if the clients perform their credit rating properly."
The quarterly reports of the scheduled banks will include the developments regarding the Basel II accord, Mr Wadood said. "The banks must encourage their clients to conduct credit ratings of their business units."
He said the banks have already informed the bank regulator that about 10 to 15 per cent of their clients would opt for credit rating by March.
Mr Wadood said it would be unwise to say the central bank is rushing to implement the Basel II as the process started in July 2006.
"We are regularly consulting with the banks to make them prepare for the change. And the capacity building of the banks started in 2007," he said.
He said: "Now all the banks are familiar with the messages of the Basel II and its three pillars."
Minimum capital requirement, supervisory review and market disclosure constitute the Basel II accord.
During his keynote presentation, John Rutherfurd, Jr, former chairman and chief executive of Moody's Corporation, said that at macroeconomic level, ample liquidity, low interest rates, dramatic expansion of financial leverage and improper pricing of risks were the causes behind the crisis.
"At institutional level, fundamental failures in the assessment of risks by financial firms and credit rating agencies, corporate governance failures in financial firms and regulatory, supervisory and crisis management failures -- all were responsible for it."
Mr Rutherfurd said: "The crisis has revealed that many banks did not have sufficient capital to support their risk profile which turned out to be significantly higher than initially thought."
Mirza Azizul held the credit rating agencies partly responsible for the global financial tsunami as they did not evaluate risks properly.