Ten scheduled banks are highly vulnerable to reasonable amount of losses as the banks have failed to maintain minimum capital to risk-weighted assets ratio (CRAR), according to the Bangladesh Bank’s Financial Stability Assessment Report for the period of April-June this year.
The central bank released the report on Thursday.
The BB assessed 57 out of 59 scheduled banks in its report.
In line with the Pillar 1 of the Basel III capital framework, all the scheduled banks are supposed to maintain minimum 10 per cent CRAR.
Maintaining CRAR, also known as capital adequacy ratio (CAR), is obligatory for the banks and financial institutions to protect depositors and promote the stability and efficiency of financial systems, BB officials said.
Any bank or its depositors may fall into troubled water unless the minimum required CRAR is maintained, he said.
The rest 47 banks have managed to comply with the provision of maintaining at least 10 per cent or above as CRAR.
The report, however, said that the overall CRAR of the banking sector increased to 11.7 per cent at the end of June this year, up 80 basis points on last year.
It also said that 30 banks’ CRARs were within the range of 10-15 per cent and their aggregate assets accounted for nearly 59.4 per cent of the total banking industry’s assets at the end of June this year.
As 10 banks failed to maintain required CRAR, the rest 47 banks were considered for applying different stresses, the Financial Stability Assessment Report said.
The report said that 22 of the 47 banks would fail to maintain the required CRAR if three large borrowers of each bank became loan defaulters.
If seven large borrowers of each bank become loan defaulters, 34 banks would fail to maintain the required CRAR and loan defaulting by 10 large borrowers would result in 35 banks failing to maintain the required CRAR.
Although the central bank has been pressing the banks to reduce the advance-deposit ratio (ADR), the overall ADR of the banking industry stood at 77.5 per cent, up 0.8 percentage points on 78.5 per cent a year ago.
A number of banks were maintaining higher ADR but the overall ADR of the banks was lower than the stipulated limit. As per the BB’s latest instruction, conventional banks are supposed to keep their ADR within 85 per cent and the Islamic banks within 90 per cent.
However, the balance sheet size of the banking sector stood at Tk 15,470.9 billion at the end of June this year from Tk 14,004 billion a year ago.
As per the central bank’s stress test, only four out of 34 non-bank financial institutions were positioned in green zone, 18 in yellow zone and 11 in the red zone including People’s Leasing and Financial Services that is facing liquidation, the BB report said.
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