Banks' capital rises

Banks' overall capital rose 1.6 percent in the April-June quarter but the capital base of state banks shrank further though they were provided with funds from the state coffer.

On June 30, the total capital in the banking system was Tk 76,884 crore, up from Tk 75,612 crore on March 31, according to Bangladesh Bank.

Most of the private and foreign commercial banks succeeded in maintaining the new international standard for capital adequacy ratio.

But as the state banks' capital situation deteriorated, the ratio fell slightly in June compared to that in March.

On June 30, the banks' average capital to risk weighted assets ratio or CRAR was 10.34 percent. This was 10.62 percent three months back, similar to the latest requirement.

CRAR is a measure of a bank's capital and is used to protect depositors and promote the stability and efficiency of financial systems around the world.

CRAR of the private banks was 11.91 percent and that of the foreign banks 34.73 percent. However, it was 5.75 percent for the state banks.

The central bank last year took an initiative to improve banks' financial health by increasing their CRAR in line with Basel III standards, which was introduced in January this year.

Basel III is a comprehensive set of reform measures, developed by the Basel Committee on Banking Supervision, to strengthen regulation and supervision and reduce risks of the banking sector globally.

Last year, the central bank decided to implement the Basel III framework and conducted a quantitative impact study.

On the basis of the study, they also sent a roadmap to the banks on how they would implement the framework.

In two quarters from January, the BB evaluated the banks' capital adequacy as per the Basel III standards.

Until December 31, 2015, the banks had to maintain their capital adequacy at 10 percent of their CRAR.

But from 2016 to 2019, the banks will have to maintain their capital at 0.625 percent in addition to 10 percent of their CRAR.

Forty eight out of the 56 banks in Bangladesh could maintain their capital as per the new standards, according to a BB report.

Eight banks -- Sonali, Rupali, BASIC, Krishi Bank, Rajshahi Krishi Unnayan Bank, Bangladesh Commerce Bank, Premier and ICB Islamic Bank -- failed to maintain minimum capital.

At the end of June, the overall capital requirement was Tk 77,524 crore, but the banks' total capital was Tk 76,884 crore, which means overall shortfall was Tk 639 crore, and that was due to huge deficit in the state banks.

Capital shortfall of six state banks was Tk 6,070 crore, which was 28 percent higher than that in the first quarter.

Two specialised banks' shortfall was Tk 8,114 crore, a 3.83 percent rise from the amount in the first quarter.

Though the state banks for the last few years have been getting funds from the government to plug their deficits, their capital situation has worsened, mainly due to the rise in their default loans, a BB official said.

The private banks did not have any shortfall; rather, their surplus was Tk 8,784 crore. The foreign banks' surplus was Tk 4,761 crore.