Sonali Bank seeks Tk 10,000cr to meet BASEL III requirements | The Daily Star
12:00 AM, July 06, 2020 / LAST MODIFIED: 02:36 AM, July 06, 2020

Sonali Bank seeks Tk 10,000cr to meet BASEL III requirements

State-run Sonali Bank has sought about Tk 10,000 crore as regulatory capital from the government in order to implement the BASEL III guidelines.

The bank sent a letter to the finance ministry in the last week of June requesting it to provide the capital support.

The fund will be used to manage its historical loss, an official of the bank said.  

Sonali Bank incurred a cumulative loss of Tk 6,574 crore in 2007 when it became a corporate organisation.

As per the regulatory requirement, the bank was asked to adjust the loss within 10 years. This means the bank would have to deduct Tk 657 crore per year from the net profit to adjust the loss.

But the lender has failed to do so as it had faced a weak profit trend for years, forcing it to adjust the loss by converting funds from its capital.

In addition, it would take additional funds to fulfil the Basel III guidelines.

"Sonali Bank does not have any liquidity crunch right now. But it will have to maintain the regulatory compliance as per the Basel III guidelines," the official said.

So, the bank has requested the finance ministry to come up with the amount.

"We do not need any cash. The government could issue a guarantee letter against our proposal. Then, the bank will submit it to the central bank to show it as the capital," the banker said.

The bank has sought the capital a number of times, said Md Ataur Rahman Prodhan, managing director of Sonali Bank.

If the government provides the fund, the bank will be able to meet the Basel III requirement, he said.

Basel III is an internationally agreed set of measures developed by the Basel Committee on Banking Supervision in response to the Financial Crisis of 2007-09 with a view to improving regulation, supervision and risk management within the banking sector.

As of December, capital adequacy ratio (CAR) at Sonali Bank stood at 0.50 per cent, much lower than the permissible limit of 12.50 per cent.

The CAR is a measurement of a bank's available capital expressed as a percentage of its risk-weighted credit exposures, which is used to protect depositors and promote the stability and efficiency of banks around the world.

Risk-weighted assets are used to determine the minimum amount of capital that must be held by banks and other institutions to reduce risks of insolvency.

 

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