A BIBM study has recommended recording and preservation of disaster-related data to quantify the volumes and extent of financial losses to the banks due to disasters.
The study placed a recommendation before the central bank to initiate a reporting requirment to help identify overall systemic risks associated with natural and manmade disasters in the banking sector.
The study also urged the central bank to issue guidelines for banks to formulate customised banking continuity planing based on their policy, operations, client base and portfolios.
The study presentation titled 'Addressing Disaster Risk by Banks: Bangladesh Perspective' was presented Thursday at Bangladesh Institute of Bank Management(BIBM) in Dhaka.
A five-member team led by BIBM Professor Shah Md Ahsan Habib conducted the study.
The study suggested that it is time for mentioning specific capital requirement as a macro-prudential supervisory norm to ensure effective disaster risk management in banks.
It said a developed insurance market and attractive targeted insurance products might be the true solution for disaster risk management of banks as Bangladesh is one of the top disaster-prone countries.
According to the survey of German Watch, Bangladesh is in the top third climate disaster affected country in terms of the number of events. In terms of per unit GDP, Bangladesh is in the fourth position.
Total loss of Bangladesh in climate disaster was estimated as US$2,284 million, which is the third large loss among top 10 countries during 1996-2015.
The study said the selected micro insurance products may be offered from the country's banks and such tools may also be tagged with lending products in the process of lending to the agricultural and small and micro sectors that are particularly prone to the disaster risk.
"Index based micro insurance might contribute to address disaster risk in agricultural lending in the country."
The study recommended using CSR fund to meet as additional risk premium relevent to disaster-prone areas and to use writing off loans in certain areas following any deadly natural disasters, if required.
It identified challenges of disaster risk management such as early warning system, lack of awarness, technical knowhow, and low demand for insurance coverage by clients.
Speaking at the programme, Bangladesh Bank deputy governor Abu Hena Mohd Razee Hassan said the central bank undertook a number of initiatives to address disaster risk through different regulatory initiatives, which put banks and NBFIs in a comparatively secured zone from the vulnerability and extent of financial losses incurred due to these disasters.
The BIBM seminar presented another paper on "Impact of Adopting Basel Accords in the Banking Sector of Bangladesh".
A team led by BIBM professor Md Nehal Ahmed conducted the study.
The study said capital to risk-weighted asset ratio of specialised state-owned banks had been showing declining trend from -7.25 per cent in 2010 to -33.67 per cent in 2016.
The study also found both state-owned commercial banks and specialised banks posted huge capital shortfall of Tk 59.93 billion and Tk78.26 billion respectively in 2016.
The study recommended increasing capital to improve financial stability in the state-owned banks.
Speaking on the topic, BB Deputy Governor Mr Hassan said that the country's banks are working to comply with the new capital accord, which has been formulated by Bangladesh Bank in line with global Basel-III framework.
Meghna Bank Managing Director Mohammad Nurul Amin said the top officials must convince board members to do what must be done to maintain stability in a bank.
BIBM supernumerary professor Yasin Ali said that if banks need to raise capital, the top executives need to convince the board, not the clients.
He also said some banks were terminating skilled manpower, although the country's banks were suffering from skilled manpower.
Another BIBM supernumerary professor Helal Ahmed Chowdhury urged bankers to create a fund to mitigate disaster risks for emergency need.
He also stressed the need for awareness of the board for both encountering disaster risk and capital rise.
Professor at Dhaka University finance Department Mahmood Osman Imam urged the government to enact merger and acquisition law.
He also said that the boards can do whatever they wish as managing director has become weakened for contractual appointment in the banks.
BIBM director general Toufic Ahmad Chowdhury, Bangladesh depeloment Bank managing director Manjur Almed, director of BIBM Dr Prashanta Kumar Banarjee, BIBM professor Shah Md Ahsan Habib and Md Nehal Ahmed spoke at the seminar, among others.
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