Banks asked to close operation of EEA
Tuesday, 27 April 2010
FE Report
Bangladesh Bank has asked the commercial banks to close the operation of Exchange Equalisation Account (EEA), the balance of which might be shown as their capital, officials said.
"There is no need to maintain such account while there is floating exchange rate regime," a senior official of the Bangladesh Bank (BB) told the FE Monday, adding that the money came only from exchange gain was deposited in the account, which has been in operation since March 5, 1979.
The balance of account will be shown as extra ordinary gain instead of operating profit, according to a BB circular, issued Monday, asking the chief executives of all scheduled banks to maintain the instruction properly.
Bangladesh adopted a floating exchange rate on May 31, 2003 to avoid overvaluation of the domestic currency.
A total of Tk 1.026 billion remained as balance in the EEA with 44 commercial banks out of 48 as of December last, according to the central bank statistics.
"The banks may show the balance amount as core capital, officially known as tier-1, after payment of tax to raise their capital and meet the Basel-II requirement," another BB official told the FE.
The central bank has already relaxed guidelines relating to risk-based capital adequacy for banks under Basel-II framework considering the overall financial position in the country's banking sector.
Under the amended guidelines, the banks will have to comply with the minimum capital required (MCR) at 8.0 per cent from January 1, 2010 to June 30, 2010 while a rate of 9.0 per cent will be maintained from July 1, 2010 to June 30, 2011.
The banks, however, must comply with the MCR at 10 per cent from July 1 next year and onward, according to a circular issued by the BB earlier.
The MCR has been set at 10 per cent with the risk-weighted assets of the banks or Tk 4.0 billion of total capital, whichever is higher, which would be treated as MCR of the banks under the Basel-II accord.
Bangladesh Bank has asked the commercial banks to close the operation of Exchange Equalisation Account (EEA), the balance of which might be shown as their capital, officials said.
"There is no need to maintain such account while there is floating exchange rate regime," a senior official of the Bangladesh Bank (BB) told the FE Monday, adding that the money came only from exchange gain was deposited in the account, which has been in operation since March 5, 1979.
The balance of account will be shown as extra ordinary gain instead of operating profit, according to a BB circular, issued Monday, asking the chief executives of all scheduled banks to maintain the instruction properly.
Bangladesh adopted a floating exchange rate on May 31, 2003 to avoid overvaluation of the domestic currency.
A total of Tk 1.026 billion remained as balance in the EEA with 44 commercial banks out of 48 as of December last, according to the central bank statistics.
"The banks may show the balance amount as core capital, officially known as tier-1, after payment of tax to raise their capital and meet the Basel-II requirement," another BB official told the FE.
The central bank has already relaxed guidelines relating to risk-based capital adequacy for banks under Basel-II framework considering the overall financial position in the country's banking sector.
Under the amended guidelines, the banks will have to comply with the minimum capital required (MCR) at 8.0 per cent from January 1, 2010 to June 30, 2010 while a rate of 9.0 per cent will be maintained from July 1, 2010 to June 30, 2011.
The banks, however, must comply with the MCR at 10 per cent from July 1 next year and onward, according to a circular issued by the BB earlier.
The MCR has been set at 10 per cent with the risk-weighted assets of the banks or Tk 4.0 billion of total capital, whichever is higher, which would be treated as MCR of the banks under the Basel-II accord.