Banks' capital swells

Banks' capital base rose by about 30 percent in the last quarter of 2013 despite a huge shortfall in some badly-managed banks including the problem-ridden BASIC.
On December 31, banks' total capital stood at Tk 65,191 crore against Tk 50,328 crore recorded three months ago, according to Bangladesh Bank.
Bankers said the rise in capital was mainly due to a fall in their default loans.
As per international standards, a capital adequacy ratio (CAR) of 10 percent is required, but the CAR of Bangladeshi banks stood at 11.52 percent at the end of December, which was 9.14 percent three months back.
CAR is the ratio of a bank's capital to its risk weighted assets.
In December, the banks had a surplus capital of Tk 3,355 crore though they had a deficit of Tk 10,000 crore in September.
A loan recovery drive at the end of December contributed to a fall in banks' default loans, said Helal Ahmed Chowdhury, vice chairman of Association of Bankers-Bangladesh, a platform of chief executives of banks.
The central bank in December relaxed loan rescheduling rules to help businesses affected by political unrest. This measure has also brought down default loans and raised capital in banks, said Chowdhury, also the managing director of Pubali Bank.
As the scope will not exist after June, the banks will have to strengthen their monitoring so that their capital situation does not deteriorate again, he said.
Besides, many banks have started increasing their capital base in line with the Basel III requirements, which is also a reason behind the overall rise in banks' capital, Chowdhury said.
According to central bank statistics, state-owned banks had no capital deficit during October-December last year; rather they had a surplus of Tk 855 crore. Their CAR was 10.81 percent during the period.
Private banks' average CAR was 12.52 percent though two banks had a capital shortfall -- Bangladesh Commerce Bank's Tk 77 crore and ICB Islamic Bank's Tk 1,385 crore.
The foreign banks' average CAR was 20 percent but one bank -- National Bank of Pakistan -- had a capital deficit of Tk 331 crore.
The specialised banks' CAR was in the negative territory, -9.65 percent, and their shortfall reached Tk 6,382 crore at the end of December.
Of the specialised banks, Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank have a perennial capital shortfall as they are not run on a commercial basis.
However, among the specialised ones, BASIC Bank's condition is the worst with a capital shortfall of Tk 647 crore at the end of December, which was Tk 597 crore in September.
BASIC Bank in September last year signed a memorandum of understanding with Bangladesh Bank, pledging to improve its financial condition, but to no avail.
Early this month the central bank sent a notice to the managing director of BASIC, asking him to explain why he should not be removed from the post.
A BASIC Bank official said, after the signing of the MoU, huge irregularities were detected in a branch of the bank which prompted the central bank to send such a notice.