BB allows new agency to assess SME credit risks

Siddique Islam | Published: November 04, 2013 00:00:00 | Updated: November 30, 2024 06:01:00

The central bank has allowed one more credit rating agency alongside the seven such agencies already operating in the country.
The Bangladesh Credit Rating Agency Ltd. would assess the SME credit risks as the external credit assessment institution (ECAI) in line with the Basel-II framework, officials said Sunday.
"We've recognised the new credit agency as an eligible ECAI to meet the bank clients' demand for the small and medium enterprise (SME) credit rating as well as improve competition among the credit rating agencies," a senior official of the Bangladesh Bank (BB) told the FE.
He also said the banks now would be allowed to nominate one or more rating agencies for their SME clients' credit rating for the purpose of calculating the risk-weighted assets (RWA) against credit risks in line with the Risk Based Capital Adequacy (RBCA) guidelines.
Â "Such rating will help make loans available for SME clients," the central banker noted.
Currently, seven credit rating agencies-Credit Rating Information and Services Limited (CRISL), Credit Rating Agency of Bangladesh (CRAB), National Credit Rating Limited (NCRL), Emerging Credit Rating Limited (ECRL), ARGUS Credit Rating Services Limited (ACRSL), Alpha Credit Rating Limited (ACRL) and Waso Credit Rating Company (BD) Limited-are operating in Bangladesh.
The mapping of the new rating agency was already set to calculate the RWA, the BB official said adding that the central bank issued a circular in this connection recently.
"We've taken the move aiming to improve the overall credit risks management efficiency of the banks," another BB official said without elaborating.
Bangladesh is now implementing the Basel-II accord to consolidate the capital base of banks in line with the international standard.
It has been prepared taking into account three things: minimum capital requirement, supervisory review process and market discipline.
Besides, three types of risks -credit risk, market risk and operational risk-have to be considered under the minimum capital requirement.