Banks plan to issue bonds to boost capital

Many public and private banks have been considering issuing bonds next year to maintain the new international standards for capital adequacy ratio.

Officials at the finance ministry and the Bangladesh Bank said the government has been considering releasing bonds to meet the huge capital shortfall in BASIC, Sonali and Rupali banks.

But private banks have been mulling over the same but to increase their capital more in accordance with international standards.

The amount of capital that may be raised from the market has not yet been finalised, but Tk 4,000 crore to Tk 5,000 crore worth of bonds may be released, officials said.

The government has been considering issuing bonds worth more than Tk 2,500 crore for scam-hit BASIC Bank and Tk 500 crore for Rupali Bank.

Four private banks have sought permission from the central bank to issue bonds to improve their capital base.

The central bank last year took an initiative to improve the banks' financial health by increasing their capital to risk-weighted assets ratio in line with Basel III standards, which was introduced in January this year. CRAR is the ratio of a bank's capital to its risk.

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 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.

CRAR is expected to increase gradually this year but statistics show in every quarter it has been decreasing due to some problematic banks.

Most of the private and foreign commercial banks succeeded in maintaining the new international standard for capital adequacy ratio, but the state banks' capital situation deteriorated in every quarter.

On September 30, the banks' average CRAR was 10.31 percent, which was 10.34 percent in June; three months earlier, it was 10.62 percent.

CRAR of the private banks was 11.83 percent in September, down slightly from 11.91 percent in the previous quarter. For state banks, it was 5.62 percent, down from 5.75 percent in the previous quarter.

The capital shortfall of six state owned commercial banks including BASIC and Sonali have been increasing every quarter. At the end of September, their capital shortfall stood at Tk 6,315 crore, which was Tk 6,070 crore three months earlier.

Sonali Bank's capital shortfall was Tk 2,274 crore, BASIC's Tk 2,424 crore, Rupali's Tk 1,368 crore, Janata's Tk 771 crore and Agrani's Tk 112 crore. However, Bangladesh Development Bank has a surplus of Tk 634 crore.