Banks asked to raise their total capital to Tk 2.0b

---

FE Report
The Bangladesh Bank (BB) has instructed the commercial banks for raising their total capital - paid-up and reserve - to Tk 2.0 billion from the existing Tk 1.0 billion in two phases within June 2009, official sources said.
According to the instructions, the banks will have to enhance 50 per cent of their new capital requirement by June 2008 and the balance amount by the end of June 2009.
The central bank issued a circular in this connection Monday allowing the time-frame to meet the capital requirement in line with the existing the Bank Companies (Amendment) Ordinance 2007, published October 08 last.
"We have issued the circular to implement the ordinance," a BB senior official told the FE Monday, adding that at least 15 commercial banks may face problems in raising their capital as per the new requirements.
The central bank also asked the banks to meet the required capital by increasing its reserve or issuing rights shares or floating initial public offerings (IPOs). But no bank will be allowed to offer cash dividends so long there is capital deficit.
In case of foreign banks, they have to meet the capital requirement by injecting fresh funds from overseas sources or stopping expatriation of post-tax profits.
Besides, as an option, the banks may consider for merging with other banks and non-banking financial institutions (NBFIs) to meet the capital requirement within the time-frame, the BB suggested.
The BB earlier introduced a policy of merger and acquisition for banks and NBFIs in order to make them operationally sound.
The central bank earlier recommended to the government for increasing the amount of capital of the commercial banks in line with the BASEL-II requirement, the sources added.
Bangladesh is expected to implement the Basel-II framework for bank companies from early 2009 in line with the global standard.
The new Basel accord has been prepared on the basis of three fundamentals: minimum capital requirement, supervisory review process and market discipline.
On the other hand, the central bank asked the banks to comply with the rules and regulations relating to the tenures and numbers of board of directors to ensure good governance in the banking sector.
The BB also issued a separate circular Monday and asked the banks to implement the existing rules and regulations limiting the number of directors and their tenures under the Bank Companies (Amendment) Ordinance 2007.
The board of directors of a commercial bank will consist of no more than 13 members excepting the shareholder directors and their tenures will be restricted to two consecutive terms (three-year term each), according to the existing rules.
A family having above 5.0 per cent shares in a banking company would be entitled to have no more than two directors in its board, and a family having less than 5.0 per cent shares would be able to hold one post of director.
Parents, spouses, children, brothers and sisters and their dependants would be considered members of a family.
"The uncertainties on the number of directors and their tenures of responsibilities have been removed through issuing the circular," another BB senior told the FE.