Nine banks' capital shortfall swells to Tk 177b in Q3

Two more enter list of capital-deficient banks

Siddique Islam | Monday, 4 December 2017

Nine banks, four owned by the government, had an aggregate capital shortfall worth over Tk 177 billion at end of the third quarter (Q3) of the current calendar year as growing bad loans sapped their money.
Furthermore, two more banks -- one a state-owned commercial bank (SoCB) and another a fourth-generation private commercial bank (PCB) -- hit the list of capital-deficient banks during the July-September period of 2017.
The nine banks -- four SoCBs (out of total six), three of 40 PCBs and two specialised banks (SBs) -- were put on the list of banks with capital shortfall, according to the central bank officials.
Earlier in the Q2, seven banks were deficient in capital, valued at nearly Tk 154 billion.
"The banks had kept aside more money from their capital for maintaining provisioning requirements against their non-performing loans (NPLs)," a senior official of the Bangladesh Bank (BB) told the FE while explaining the capital shortages.
The overall capital shortfall of the six SoCBs rose to Tk 69.12 billion in Q3 from Tk 46.55 billion three months before. It was Tk 59.66 billion in Q1 of the current year (2017).
However, the capital shortfall of two specialized banks stood at Tk 82.83 billion in the Q3 from Tk 80.29 billion in Q2. It was Tk 80.32 billion as on March 31 this year.
The capital shortfall of three PCBs amounted to Tk 17.91 billion in the Q3 from Tk 17.88 billion three months ago when the number of these capital-deficient banks was two.
Besides, higher NPLs eroded the overall capital-to-risk weighted-asset ratio (CRAR) of all banks during the period under review, they added.
The amount of snowballing classified loans in the country's banking sector jumped by more than 29 per cent or Tk 181.35 billion in the first nine months of the current calendar year despite close monitory by the central bank.
The volume of NPLs rose to Tk 803.07 billion as on September 30 last from Tk 621.72 billion on December 2016. It was BDT 657.31 billion a year ago.
The overall CRAR of all the banks operating in Bangladesh came down to 10.65 per cent in the Q3 from 10.86 per cent three months before. It was 10.68 per cent in the Q1.
All PCBs' CRAR was found, on average, 12.20 per cent on September 30 last while the CRAR of nine foreign commercial banks stood at 24.03 per cent. "But the capital position of public banks is still a matter of grave concern," the central banker said while explaining the overall situation of the state banks.
The CRAR of six SoCBs stood at 5.56 per cent as on September 30 this year while the CRAR of two SBs was in the negative territory at 33.49 per cent, the BB data showed.
"We expect that the overall capital situation will improve in the final quarter of this year with possible decline in the amount of NPLs," the central banker noted.
However, the total actual capital of all banks rose to Tk 901.01 billion during the July-September period from Tk 899.60 billion three months ago.
Bangladesh started implementing the Basel-III standard for calculation of CRAR of all banks in Q1 of 2015 for consolidating stability in the banking sector.
Under a roadmap to comply with the Basel-III, the banks will have to maintain 11.25 per cent of CRAR including 1.25 per cent capital- conservation buffer by the end of December 2017.
The CRAR remains unchanged at 10 per cent while 0.625 per cent capital-conservation buffer has to be included each year.
The banks will have to maintain 11.875 per cent CRAR by 2018. Finally in 2019, it will hit the desired level of 12.50 per cent, according to the roadmap.
Basel-III is a new global regulatory standard on banks' capital adequacy and liquidity as agreed by the members of the Basel Committee on Banking Supervision.
The third of the Basel Accords was developed in response to deficiencies in financial regulation revealed by the financial crisis of the late 2000s.
The Basel-III is set to strengthen bank capital requirements and introduce new regulatory requirements on bank liquidity and bank leverage.

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