BB modifies provisioning against bank guarantee

Staff Correspondent | Published: 00:00, Oct 19,2018 | Updated: 00:36, Oct 19,2018

 
 

Bangladesh Bank on Thursday slightly tightened the banks’ requirement of keeping general provision against guarantees on which counter-guarantees were issued by multilateral development banks or international banks.
The central bank in a circular said that general provision would be exempted only for the guarantees against which the counter-guarantees were issued only by the MDBs and international banks having a BB rating of 1.
For guarantees related to MDBs and IBs having BB rating of 2, the general provision would be 0.5 per cent and for IBs with rating of 3 and 4 the provision would be 0.75 per cent.
For guarantees related to other MDBs and IBs the rate of general provisioning would be 1 per cent.
BB’s rating would be equivalent to what it outlined in the
Guidelines on Risk Based Capital Adequacy (Revised Regulatory Capital Framework for banks in line with Basel III).
BB earlier in June issued a circular exempting banks from maintaining general provision for the guarantees against which multinational development bank or international banks having BB rating grade ‘1’ issued counter guarantee.
BB officials said that in the previous circular there was no mention about the MDBs and IBs of other BB grades.
Earlier, in September 2012, the central bank asked the banks to maintain 1 per cent general provision against such guarantees.
In February this year, the central bank lowered the required general provision against unclassified housing finance from 2 per cent to 1 per cent to facilitate banks to extend more loans to the real estate sector.

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