BB eases capital adequacy requirement provision for banks
Thursday, 13 March 2008
Siddique Islam
The Bangladesh Bank (BB) has allowed the commercial banks to show a maximum of 50 per cent of the revaluation reserves of the government approved securities held by them to meet their capital adequacy requirement.
"We expect the latest measure to help the commercial banks meet their capital adequacy in line with the central bank requirement," a BB senior official told the FE.
Constituents of supplementary capital, generally known as tier-2, have been reviewed and it has been decided to add the new component -- revaluation reserves of the securities -- which are held for fulfilment of statutory liquidity requirement (SLR) by a bank company, the central bank said in a circular, issued Wednesday.
These securities are treated as held to maturity (HTM) or investment securities and the revaluation gains will be added to the capital account of the bank company.
The central bank official also said the BB has already increased the amount of the required minimum capital for commercial banks to 10 per cent of their risk-weighted assets from 9.0 per cent earlier.
The BB also asked the chief executives of all commercial banks to add the new component for calculation of the supplementary capital.
Currently, general provision maintained against unclassified loans, assets revaluation reserves, all other preference shares, perpetual subordinated debt, exchange equalisation account and maximum 50 per cent of the revaluation reserves of HTM securities are treated as components of the supplementary capital of the banks.
Earlier, the central bank increased the amount of the required minimum capital for commercial banks to 10 per cent of their risk-weighted assets from 9.0 per cent to consolidate its capital base aiming to implement the Basel-II framework.
The BB has taken initiatives to implement the Basel-II accord for banks from 2009 in line with the global standard.
The Bangladesh Bank (BB) has allowed the commercial banks to show a maximum of 50 per cent of the revaluation reserves of the government approved securities held by them to meet their capital adequacy requirement.
"We expect the latest measure to help the commercial banks meet their capital adequacy in line with the central bank requirement," a BB senior official told the FE.
Constituents of supplementary capital, generally known as tier-2, have been reviewed and it has been decided to add the new component -- revaluation reserves of the securities -- which are held for fulfilment of statutory liquidity requirement (SLR) by a bank company, the central bank said in a circular, issued Wednesday.
These securities are treated as held to maturity (HTM) or investment securities and the revaluation gains will be added to the capital account of the bank company.
The central bank official also said the BB has already increased the amount of the required minimum capital for commercial banks to 10 per cent of their risk-weighted assets from 9.0 per cent earlier.
The BB also asked the chief executives of all commercial banks to add the new component for calculation of the supplementary capital.
Currently, general provision maintained against unclassified loans, assets revaluation reserves, all other preference shares, perpetual subordinated debt, exchange equalisation account and maximum 50 per cent of the revaluation reserves of HTM securities are treated as components of the supplementary capital of the banks.
Earlier, the central bank increased the amount of the required minimum capital for commercial banks to 10 per cent of their risk-weighted assets from 9.0 per cent to consolidate its capital base aiming to implement the Basel-II framework.
The BB has taken initiatives to implement the Basel-II accord for banks from 2009 in line with the global standard.