The capital base of the country's banking sector fell slightly in the first quarter (Q1) of 2015 mainly due to implementation of Basel-III standard, officials said.
The overall capital-to-risk weighted assets ratio (CRAR) of all banks stood at 10.73 per cent in the Q1 of this year. It was 11.35 per cent three months ago under Basel-II calculation, according to the central bank's latest statistics.
"The capital base of the banks decreased slightly during the period under review while quality of capital components improved because of the implementation of the Basel-III," a senior official of the Bangladesh Bank (BB) told the FE.
Bangladesh started implementing Basel-III for calculation of CRAR from the Q1 of this calendar year aiming at consolidating the stability in the banking sector, the central banker explained.
He also said the central bank wants to improve the quality of capital through deduction of less quality components of the capital in line with the Basel-III requirements.
"Although some banks may face extra pressure on capital requirements, the overall banking sector is quite resilient with the new regulations of the capital requirement under the Basel-III," the BB official observed.
Under the roadmap for implementation of the Basel-III framework, the banks will have to maintain 10 per cent CRAR in 2015, 10.625 per cent by 2016, 11.25 per cent by 2017 and 11.875 per cent by 2018. Finally in 2019, it will hit the desired level of 12.50 per cent.
"We're now working to ensure complete implementation of Basel-III from the first day of 2020," another BB official told the FE.
He also said the country's banking sector is still in a better position in terms of CRAR in line with the roadmap but it would be difficult in future if the banks do not take necessary measures from right now.
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 total regulatory capital, generally known as actual capital of the country's banking sector, decreased by more than 3.0 per cent to Tk 693.34 billion during the January-March period of the current calendar year from Tk 717.54 billion in the final quarter of the last calendar year.
Besides, the overall capital surplus of the banking sector came down to Tk 4.13 billion in the Q1 from Tk 40.69 billion in the previous quarter, the BB data showed.
Four state-owned commercial banks (SoCBs) out of five, two private commercial banks (PCBs) and two development finance institutions (DFIs) were on the list of those facing capital shortfall during the Q1, according to the BB official.
"Eight banks out of 56 have faced a shortfall of capital mainly due to higher volume of their classified loans," the central banker noted.
All private commercial banks' CRAR was found on an average at 12.16 per cent as on March 31 last. But it was the capital position of state-owned banks which was a matter of grave concern, he added.
The central bank earlier fixed the CAR at minimum 10 per cent considering the country's overall risk factors in the banking sector.
Under the Basel-II provision, the standard requirement of CAR is minimum 8.00 per cent.
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