Public sector banks see fast erosion in capital base in Q1

All the public-sector banks witnessed sharp erosion in their capital base in the first quarter (Q1) of the current calendar (2015) year mainly due to further deterioration in the quality of their assets and meeting of some of the Basel-III requirements, officials said.
The capital shortfall of all eight state-owned banks had increased by nearly 30 per cent to Tk 105.89 billion in the first quarter (Q1) of 2015 from Tk 81.69 billion three months ago, according to the central bank's latest statistics.
"The quality of assets of the public sector banks has been deteriorating continuously for lack of due diligence and internal control and compliance (ICC)," a senior official of the Bangladesh Bank (BB) told the FE.
ICC includes monitoring, supervision, recovery, maintaining ethical standards and prevention of fraud and forgery.
"The improvement of ICC so far has not reached the satisfactory level. So we will sit with the top management of four state-owned commercial banks (SoCBs) next week," the central banker noted.
The BB is scheduled to sit with the chief executive officers and chairmen of four SoCBs on July 12 to review their overall performance.
Besides, there was erosion in the capital base of all banks, including SoBs, during the period under review (Q1) following exclusion of a few components from the capital in line with the Basel-III requirements.
Bangladesh started implementing Basel-III for calculation of capital-to-risk weighted assets ratio (CRAR) from the Q1 of this calendar year, aiming to consolidate the stability in the banking sector.
The CRAR of four state-owned commercial banks (SoCBs) stood at 6.31 per cent in the Q1. The capital adequacy ratio (CAR) was 8.26 per cent three months before under the Basel-II calculations.
The central bank earlier had fixed the CRAR at minimum 10 per cent in keeping with 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.
On the other hand, the shortfall of CRAR of three specialised banks came down to 16.99 per cent during the period under review from 17.35 per cent in the Q4 of 2014.
The SoBs are Sonali Bank, Janata Bank, Agrani Bank, Rupali Bank, BASIC Bank, Bangladesh Krishi Bank (BKB), Rajshahi Krishi Unnayan Bank (RAKUB) and Bangladesh Development Bank Limited (BDBL).
Of them, only Janata Bank and BDBL now stay in the positive territory, the BB data showed.
Talking to the FE, another BB official said three of the SoCBs -Sonali, Agrani and Rupali - are capable of meeting their capital shortfall if they really mean business.
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