1. Welcome to the Presentation on
Revised Regulatory Capital
Framework Under Basel III
2. Basel is a city of Switzerland where the
Bank of International Settlement (BIS) is
situated. After the name of the city Basel,
the supervision rules & regulations set by
BIS is called Basel standards in short we
refer Basel.
What is Basel & Basel Accord?
Basel Accords is a set of agreements set by
the Basel Committee on Bank Supervision
(BCBS), which provides recommendations
on banking regulations in regards to capital
risk, market risk and operational risk. The
purpose of the accords is to ensure that
financial institutions have enough capital
on account to meet obligations and absorb
unexpected losses.
3. Basel in Bangladesh
Introduction of Basel I (Year-1996)
Basel I & Basel II has been run simultaneously (Year-2009)
Basel-II has been implemented in the Banking Sector (Year-2010)
BB has formulated the roadmap and issue guidelines to implement Basel III
from January 2015 (Year-2014)
Basel-III starts its journey in Bangladesh from January 2015 with some
relaxation of prescribed RBCA Guidelines (Year- 2015)
4. Basel II Framework- Basel I VS. Basel II
Basel I
• One size fits all
• Limited acknowledgement of
collateral
• Capital requirement for credit and
market risk only
Basel II
• Focus on bank’s own internal
methodologies, supervisory review
and market discipline
• Standard comparison (or calibration)
between economic capital and
regulatory capital
• Flexibility, variety of approaches and
incentives for better risk
management
• More precise risk estimation
5. 3 Pillars of Basel II
Minimum
Required
Capital
Supervisory
Review
Process
Market
Discipline
6. Roadmap of Basel-III released by Bangladesh Bank
Issuance of Guidelines by December 2014:
Draft Guidelines Issued: 19 August 2014
Final Guideline Issues: Through BRPD Circular # 18, dated: 21/12/2014
Capacity Building of Bank & BB Officials: January 2015 to December 2019
Commencement of Basel III Implementation process: January 2015
Initiation of Full Implementation of Basel-III: January 2019.
Ref: BRPD Circular # 18, dated: 21/12/2014
7. Basel-III Ultimate Objectives
Strengthening the capital framework and
enhancing risk coverage;
Supplementing the Risk-based Capital
Requirement with a Leverage Ratio;
Reducing pro cyclicality and promoting
countercyclical buffers;
Addressing systemic risk and
interconnectedness;
Introducing a global liquidity standard.
11. Particulars 2015 2016 2017 2018 2019
Minimum Common Equity Tier-1 (CET-1) Capital Ratio 4.50% 4.50% 4.50% 4.50% 4.50%
Capital Conservation Buffer - 0.625% 1.25% 1.875% 2.50%
Minimum CET-1 plus Capital Conservation Buffer 4.50% 5.125% 5.75% 6.375% 7.00%
Minimum T-1 Capital Ratio 5.50% 5.50% 6.00% 6.00% 6.00%
Minimum Total Capital Ratio 10.00% 10.00% 10.00% 10.00% 10.00%
Minimum Total Capital plus Capital Conservation Buffer 10.00% 10.625% 11.25% 11.875% 12.50%
Phase-in of deductions from CET1
Excess Investment over 10% of a bank’s equity in the
equity of banking, financial and insurance entities.
20% 40% 60% 80% 100%
Phase-in of deductions from Tier 2 Revaluation Reserve (RR)
RR for Fixed Assets, Securities and Equity Securities 20% 40% 60% 80% 100%
Leverage Ratio 3.00% 3.00% 3% Readjustment Migration to Pillar1
Liquidity Coverage Ratio
≥100%
(From Sep)
≥100% ≥100% ≥100% ≥100%
Net Stable Funding Ratio
≥100%
(From Sep.)
≥100% ≥100% ≥100% ≥100%
Phase-in arrangements for Basel-III
12. Sl. No. Particulars Basel-III Basel-II
1.00
CRAR (Capital to Risk -
Weighted Asset Ratio)
Newly added as CRAR
It was CAR (Capital Adequacy
Ratio) in Basel-II.
2.00 Reporting Requirement
CRAR Quarterly basis as per formats
of DOS under EDW by the end
of the month following the
end of each quarter.
It was RBCA report instead of
CRAR and reported on
quarterly basis as per formats
of DOS under EDW by the end
of the month following the
end of each quarter.
ICAAP Yearly basis by May 31 of
every year based on the latest
audited financial report to
BRPD in both hard & soft copy.
Previously it was not
mandatory and no specified
time for submission of report.
Basel-III: Changes in Capital Framework
13. Sl. No. Particulars Basel-III Basel-II
3.00 Component of Capital
Tier-1 Capital
Going Concern Capital:
Common Equity Tier-1;
Additional Tier-1.
Core Capital
Tier-2 Capital Gone Concern Capital Supplementary Capital
Tier-3 Capital Abolished in Basel-III Additional Supplementary Capital
3.01(a)
Component of Tier-1
Capital/Common Equity
Tier-1;
a) Paid up capital
b) Non-repayable share premium
account
c) Statutory reserve
d) General reserve
e) Retained earnings
f) Minority interest in subsidiaries
g) Non-cumulative irredeemable
preference shares
h) Dividend equalization account
a) Paid up capital
b) Non-repayable share premium
account
c) Statutory reserve
d) General reserve
e) Retained earnings
f) Minority interest in subsidiaries
g) Non-cumulative irredeemable
preference shares
h) Dividend equalization account
Basel-III: Changes in Capital Framework
14. Sl. No. Particulars Basel-III Basel-II
3.01(a).
01
Deductions/regula
tory adjustments
from Tier-1 Capital
a) Shortfall in provisions
required against
classified assets;
b) Goodwill and all other
Intangible Assets;
c) Deferred tax assets
(DTA);
d) Defined benefit pension
fund assets;
e) Gain on sale related to
securitization
transactions;
f) Investment in own
shares;
g) Investments in the
Capital of Banking,
Financial and Insurance
Entities.
a) Intangible asset e.g., book value of goodwill
and value of any contingent assets, etc. which are
shown as assets;
b) Shortfall in provisions required against
classified assets;
c) Shortfall in provisions required against
investment in shares;
d) Remaining deficit on account of revaluation of
investments in securities after netting off from
any other surplus on the securities;
e) Reciprocal/crossholdings of bank’s
capital/subordinated debt artificially intended to
inflate the capital position of banks
f) Holding of equity shares in any form exceeding
the approved limit under section 26(2) of Bank
Company Act, 1991. The additional/unauthorized
amount of holdings will be deducted at 50% from
Tier 1 capital and 50% from Tier 2 capital.
g) Investments in subsidiaries which are not
consolidated.
Basel-III: Changes in Capital Framework
15. Sl. No. Particulars Basel-III Basel-II
3.01(b). Additional Tier-1
Capital
a) Instruments issued by the banks that meet
the qualifying criteria for AT1 as specified ;
b) Share premium resulting from the issuance
of AT1 instruments;
c) Minority Interest i.e. AT1 issued by
consolidated subsidiaries to third parties (for
consolidated reporting only).
No such capital was in Basel-II
3.01(b) Deduction/Regula
tory adjustments
from Additional
Tier-1 Capital
a) Investment in own AT-1 instrument
/shares;
b) Reciprocal crossholdings in AT-1 capital
of Banking, Financial and Insurance
Entities.
No such capital deduction was in
Basel-II previously.
Basel-III: Changes in Capital Framework
16. Sl. No. Particulars Basel-III Basel-II
3.02 Component of
Tier-2 Capital
a) General Provisions;
b) Subordinated debt / Instruments
issued by the banks that meet the
qualifying criteria for Tier-2 capital.
c) Share premium resulting from the
issue of instruments included in Tier 2;
d) Minority Interest i.e. Tier-2 issued by
consolidated subsidiaries to third
parties.
a) General provision
b) Revaluation reserves
• Revaluation reserve for fixed assets
• Revaluation reserve for securities
• Revaluation reserve for equity
instrument
c) All other preference shares
d) Subordinated debt
3.02.01 Deduction/Regula
tory adjustments
from Tier-2 Capital
As applicable of the areas as specified in
3.01(b) of the above.
No such deduction was applicable
3.03 Component of
Tier-3 Capital
Abolished in Basel-III Consisting of short-term subordinated
Debt (maturity less than or equal to
five years, solely for the purpose of
meeting a proportion of the capital
requirements For Market risk.
Basel-III: Changes in Capital Framework
17. Phase-in arrangement of minimum capital requirements
Particulars 2015 2016 2017 2018 2019
Minimum Common Equity Tier-1
(CET-1) Capital Ratio
4.50% 4.50% 4.50% 4.50% 4.50%
Capital Conservation Buffer - 0.625% 1.25% 1.875% 2.50%
Minimum CET-1 plus Capital Conservation
Buffer
4.50% 5.125% 5.75% 6.375% 7.00%
Minimum T-1 Capital Ratio 5.50% 5.50% 6.00% 6.00% 6.00%
Minimum Total Capital Ratio 10.00% 10.00% 10.00% 10.00% 10.00%
Minimum Total Capital plus Capital
Conservation Buffer
10.00% 10.625% 11.25% 11.875% 12.50%
19. Sl. # Particulars Basel-III Basel-II
5.01 Capital
Conservation Buffer
(CCB)
Banks are required to maintain a
capital conservation buffer of
2.5%, comprised of Common
Equity Tier 1 capital, above the
regulatory minimum capital
requirement of 10%.
No such concept was in
Basel-II
5.02 Constraint Bank should not distribute capital
i.e. pay dividends or bonuses in
any form in case capital level falls
within this range.
No such concept was in
Basel-II
Capital Conservation Buffer (CCB)
20. CET-1 Ratio
Minimum Capital Conservation Ratio
(expressed as percentage of earnings)
4.5% - 5.125% 100%
>5.125% - 5.75% 80%
>5.75% - 6.375% 60%
>6.375% - 7.0% 40%
>7.0% 0%
Individual bank’s minimum capital conservation standards
21. Use of ECAIs Rating Grade
Sl. # Particulars Basel-III Basel-II
8.00 Use of ECAIs
Rating Grade
Credit rating for one entity
within a corporate group
cannot be used to risk weight
other entities within the
same group i.e. each entity
within a same corporate
group needs to get credit
rating individually.
No such specification was in
Basel-II
23. Issues added under Liquidity Framework
Sl. No. Particulars Basel-III Basel-II
8.00 Liquidity Coverage
Ratio (LCR)
Newly added in Basel-III
No such concept was in
Basel-II
Idea
Developed to promote short-term resilience of a
bank’s liquidity risk profile by ensuring that it has
sufficient high-quality liquid assets to survive a
significant stress scenario lasting for one Month (30
days).
No such concept was in
Basel-II
Formula
Stock of HQLAs/Net cash outflows over
the next 30 calendar days ≥ 100%
No such concept was in
Basel-II
9.00 Net Stable Funding
Ratio (NSFR)
Newly added in Basel-III
No such concept was in
Basel-II
Issues covered
Developed to promote resilience over a longer
time horizon by creating additional incentives
for banks to fund their activities with more
stable sources of funding on an ongoing basis;
Has a time horizon of one year;
The ratio has been developed to provide a
sustainable maturity structure of assets and
liabilities;
Limits a bank's reliance on short-term volatile
sources of funding.
No such concept was in
Basel-II
Formula
Available amount of stable funding (ASF)/ Required
amount of stable funding (RSF) > 100%
No such concept was in
Basel-II
24. Issues added under Liquidity Framework
Sl. No. Particulars Basel-III Basel-II
10.00 Reporting of
Leverage Ratio
The parallel run period for
leverage ratio will commence
from January, 2015 and run until
December 31, 2016;
Bank level disclosure of the
leverage ratio and its
components will start from
January 1, 2015. However,
banks should report their Tier-1
leverage ratio to the BB
(Department of Off-Site
Supervision) along with CRAR
report from the quarter ending
March, 2015.
No such roadmap was in
Basel-II
25. Basel-III: Supervisory Review Process
Sl. No. Particulars Basel-III Basel-II
11.00 ICAAP Reporting Yearly reporting mandatory No such instruction was in Basel-II
12.00 Risks Covered Basel-III covers 10 (ten) risks:
Residual risks
Concentration risk
Interest rate risk in the banking
book
Liquidity risk
Reputation risk;
Strategic risk
Settlement risk
Appraisal of core risk
management practice
Environmental and climate
change risk
Other material risks
Basel-II covers 10 (ten) risks:
Residual risks
Evaluation of Core Risk
Management;
Credit concentration risk
Interest rate risk in the banking
book
Liquidity risk
Settlement risk
Other material risks
Reputation risk
Strategic risk
Environmental risk
13.00 Measures to
supplement the
supervisory review
process
Increased emphasis on firm wide
support and a number of specific risk
management topics, including risk
concentrations.
The process was run as adhoc basis
where some of the technical issues
were not specified and justified in
terms banking practices in the
respective areas.
26. Basel-III: Market Discipline
Sl. No. Particulars Basel-III Basel-II
14.00 Web page titled of
Market Disclosure
“Disclosures on Risk Based Capital
(Basel III)”
“Disclosures on Risk Based Capital
(Basel II)”
15.00 Disclosure
requirements to
improve market
discipline
Within the Qualitative &
Quantitative disclosures, the
following issues have included:
Reconciliation of regulatory
capital elements with audited
financial statements;
Information on regulatory
adjustments;
Description of limits and
minimum requirements
identifying all elements of
capital to which these apply;
Description of the main
features of capital instruments
issued;
Comprehensive explanation of
how the ratios are calculated
when banks publish ratios that
include components of
regulatory capital.
Qualitative Information
Quantitative Information
(As per Central Bank provided
formats)
28. RC RC
–––– = ––––––– ≥ 0.10
RWA A. RW
From which: RCmin = (A. RW) (0.10) = (RWA) (0.10)
If, RWA is Tk.100, MCR = (100) (0.10) = Tk.10
Where:
RC = regulatory capital of a bank.
A = value of asset / exposure
RW = risk weight
RWA = risk-weighted asset
RCmin = minimum regulatory capital.
Formula: Minimum Capital Requirement (MCR)
29. Under this approach banks are allowed to employ External Credit Assessment
Institutions (ECAIs) recognized by BB to rate customer related with specific
exposure
Rating category will be mapped with the BB rating grade expressed in numerals 1
to 6, 1 being the best
RWA depends on mainly exposure and customer's rating
Credit Risk- SA to Measure Credit Risk
31. Cash and Cash Equivalents
Claims on Bangladesh Government and BB
Claims on Other Sovereigns and Central Banks
Claims on BIS, IMF, ECB
Claims on Multilateral Development Banks (MDBs)
Claims on Other MDBs
Claims on Government/ Public Sector Entities (PSE)
Claims on Banks and NBFIs
Claims on Corporate
Claims on Retail & SME
Claims on SME
Consumer Finance
Standardized Approach
32. Standardized Approach
Claims fully secured by Residential Property
Claims fully secured by Commercial Real Estate
Past Due Claims
Capital market exposures
Investment in venture capital
Unlisted equity investments and regulatory capital instruments issued by other banks
(other than those deducted from capital) held in the banking book
Investment in premises, plant and equipment and all other fixed assets
Claims on all fixed assets under operating lease
All other Assets
33. Zero RW is applicable to following exposures:
• Cash and cash equivalents
• Claims on Bangladesh Government and BB
• Claims on Other Sovereigns and Central Banks
• Claims on BIS, IMF, ECB
• Claims on Multilateral Development Banks (MDBs e.g.
IBRD,IFC,ADB,AfDB,EBRD,IADB,EIB,EIF,NIB,CDB,IDB,CEDB)
Standardized Approach (SA)
34. Various RW is applicable to following exposures:
• Claims on Other MDBs
• Claims on Public Sector Entities
• Claims on Banks and NBFIs
• Claims on Corporate
• Claims on SME
Standardized Approach (SA)
35. Definition of SME
Industrial Policy 2010 and accordingly Bangladesh Bank’s SME & SPD circular no. 1
dated 19th June 2011 defines small and medium enterprises in terms of the value of
fixed assets with replacement cost excluding land and building or in terms of the
number of persons employed as under:
Category Industry Type
Value of Fixed Assets
(BDT)
Number of
Persons
Employed
Medium
Manufacturing >1000 lacs–3000 lacs 100-250
Service/Trading 100-1500 lacs 10-25
Small
Manufacturing 50-1000 lacs 25-99
Service/Trading 5-100 lacs 10-25
36. SA- Risk Weight for SME
Exposure Type
BB’s Rating
Grade
RW Exposure RWA
Claims on SME
SME1 0.20
SME 2 0.40
SME 3 0.60
SME 4 0.80
SME 5 1.2
SME 6 1.5
Unrated (Small
enterprise &
<BDT 3.00 m)
0.75
Unrated (Small
enterprise having
≥ BDT 3.00 m &
Medium
Enterprise)
1
37. Exposure Type
BB’s Rating
Grade
RW Exposure RWA
Claims on other MDBs
Claims on PSE
Claims on Banks (maturity
over 3 months)
1 0.20
2,3 0.50
4,5 1.00
6 1.50
unrated
0.50
1.00 for Banks
Claims on Banks (maturity
less than 3 months
0.20
Claims on Corporate
1 0.20
2 0.50
3,4 1.00
5,6 1.50
unrated 1.25
Standardized Approach (SA)
38. Exposure Type RW Exposure RWA
Claims on Retail 0.75
Consumer Loan 1.00
Claims fully secured by residential property 0.50
Claims fully secured by commercial real estate 1.00
Capital Market Exposures 1.25
Investment in venture capital 1.50
Unlisted equity investments and regulatory capital
instruments issued by other banks (other than those
deducted from capital) held in the banking book
1.25
Investments in premises, plant and equipment and all
other fixed assets
1.00
Claims on all fixed assets under operating lease 1.00
All other assets 1.00
SA- Fixed Risk Weight Group
39. Exposure Type RW Exposure RWA
1. The claim (other than claims secured by eligible residential property)
that is past due for more than 90 days and /or impaired :
Where specific provisions < 20% of the outstanding amount of the past
due claim
Where specific provisions ≥ 20% of the outstanding amount of the past
due claim
Where specific provisions > 50% of the outstanding amount of the past
due claim
1.50
1.00
0.50
2. Claims fully secured by residential property that are past due for
more than 90 days and /or impaired specific provision held there
against is less than 20% of outstanding amount
1.00
3. Claims fully secured by residential property that are past due for
more than 90 days and /or impaired specific provision held there
against is more than 20% of outstanding amount
0.75
Fixed Risk Weight Group –Past due claims
40. Balance Sheet Exposure
Exposure Type Rating RW Exposure RWA
Cash & Cash Equivalents 0 6.13 0
Claims on BD Govt. & BB 0 0 0
Claims on other Sovereigns & Central Banks 0 0 0
Claims on BIS, ECB, IMF 0 0 0
Claims on MDBs
i) IBRD, IFC, ADB, AfDB, IDB 0 0 0
II) Claims on Other MDBs If unrated 0.5 0 0
Claims on Public Sector Entities (other than
Government) in Bangladesh If Unrated 0.5 0 0
Claims on Bank (Tk. In crore)
Maturity Over 3 months If Unrated 0.5 0.09 0.045
Maturity less than 3 months Fixed RW 0.2 0.06 0.012
Claims on Corporates If Unrated 1.25 43.79 54.74
Claims under CRM: Claims on Corporate 1.25 43.90 54.88
Work Sheet
41. Fixed Risk Weight Group
Exposure Type RW Exposure RWA
Claims categorized as retail portfolio & SME <
BDT 30 lac (excluding consumer loan )
0.75 0.4 0.29
Consumer Loan 1 0.172 0.172
Claims fully secured by residential property 0.5 0.35 0.17
Claims fully secured by commercial real estate 1.00 0 0
Past Due Claims (Risk weights are to be assigned net of specific provision)
Specific provisions < 20% of the outstanding amount of the past due claim 1.50 7.51 11.26
Specific provisions ≥ 20% of the outstanding amount of the past due claim 1.00 0.0175 0.0175
Specific provisions ≥ 50% of the outstanding amount of the past due claim 0.50 0 0
Investments in venture capital 1.5 0 0
Investments in fixed assets 1.00 0.3 0.3
Claims on all fixed assets under operating lease 1.00 0 0
All Other Asset 1.00 17.37 17.37
Total 120.08 139.25
Work Sheet
42. Exposure type Exposure RW RWA
Cash in Hand (BDT) 6.02 0 0
Cash in Hand (FCY) 0.11 0 0
Investments-prize Bonds 0.0011 0 0
Total 6.13 0
Cash and Cash equivalent (BDT Crore)
43. Maturity over 3 months
Sl.
No
Account Name Type Outstanding RW RWA
1 Ideal Enterprise LDBP 0.0002 0.5 0.0001
2 CORE FDBP 0.09 0.5 0.045
Total 0.0902 0.0451
Maturity less than 3 months
3 Home Textiles Ltd LDBP 0.06 0.2 0.012
Total 0.1502 0.0571
Claims on Bank(BDT Crore)
44. Sl.
No
Account
Name
Type Outstanding RW RWA
1
Karim S.M.
Ltd
DL,LTR,PAD,O
D,TLI
34.98 1.25 43.73
2
Hamid
Fabrics
OD,TLO,LAPC 8.81 1.25 11.01
Total 43.79 54.74
Claims on Corporate (BDT Crore)
45. SL
Claims on
Corporate
Exposure (Tk. In crore) Collateral (Tk. In crore)
E*
=
Net
Exposure=
(EAH
–
CAH)
Account
Exposure
Amount
(E)
Maturity
Rating
of
Counter
Party
Haircut
of
exposure
(He)
Exposure
after
haircut
(EAH)=
E
×
(1
+
He)
Nature
of
Collateral
(C)
Value
of
collateral
Maturity
Rating
of
issuer/
Issue
Haircut
of
collateral
(Hc)
Haircut
on
currency
mismatch
(Hfx)
Collateral
after
Haircut
(CAH)=C
x
(1-Hc-Hfx)
1
Mother Textile
Mills Ltd and
Euroaisa Felt
Ltd(Corp)
33.84
unrated
0
33.8
4
Equities
listed
in
DSE
2.1
5
0.25 1.61 32.23
2
Bismillah
Corp(SE)
0.4
unrat
ed
0 0.4 FDR 0.2 0 0.2 0.2
3
Desh Bandhu
Sugar Mills
Ltd(Corp)
9.8
unrated
0 9.8
FDR
2.0
2
0 2.02 7.78
4
The Metal
(PVT) Ltd(ME)
4.02
unrat
ed
0 4.02
FDR
0.3
3
0 0.330 3.69
Total 48.06 43.90
Work Sheet-1(a): Worksheet on Credit Risk
Mitigation (CRM)
46. Claims on Retails (Tk. In crore)
SL. No Account Name Type Outstanding Granularity RW RWA
1
ABDULLAAL MAHMUD Auto Loan 0.03 0.09
0.75
0.02
2
ABDULLAH HASAN Auto Loan 0.09 0.26
0.75
0.06
3
MD. JASHIMUDDIN KHAN Auto Loan 0.10 0.28
0.75
0.075
4
PROSHANTA KUMAR
HALDER
Auto Loan 0.09 0.25
0.75
0.067
5
RAHANA BEGUM Auto Loan 0.04 0.13
0.75
0.03
0.35 1.00 0.252
Claims on Small (Limit <BDT30,00,000)
1 Khan Enterprise Sachondo 0.05
0.75
0.037
Total 0.05 0.037
Total Retail & SME 0.4 0.29
Claims on Retail and SE (Excluding Consumer Loan)
47. SL. No Account Name Types Outstanding RW RWA
1 ABDUL HANNAN MIRAJ CDL 0.015 1.00 0.015
2 A.K.M MOHSIN UDDIN UPL 0.028 1.00 0.028
3 MD. Aslam Parvez PC 0.004 1.00 0.004
4 MD.Dulal SLAPF 0.012 1.00 0.012
5 Afzalul Haq SCL 0.113 1.00 0.113
Total 0.172 0.172
CDL = Consumer Durable Loan, UPL = Unsecured Personal Loan, PC = Personal Credit, SLAPF =
Staff Loan Against Provident Fund, SCL = Staff Car Loan
Consumer Loan (BDT Crore)
48. SL. NO Account Name Account type Outstanding RW RWA
1 A.K.M. MOHSIN UDDIN HBL 0.25 0.50 0.125
2 ARIF AL ASHRAF HF 0.099 0.50 0.049
Total 0.35 0.17
SHBL = House Building Loan, HF = House Finance
Claims fully secured by Residential Property (BDT Crore)
49. Particulars RW Exposure RWA
1. The claim (other than claims secured by eligible residential
Property) that is past due for more than 90 days and/or
impaired will attract risk weight as follows
Where specific provisions are less than 20% of the
outstanding amount of the past due claim
1.50 7.51 11.26
Where specific provisions are no less than 20% of the
outstanding amount of the past due claim
1.00 0.0175 0.0175
Where specific provisions are more than 50% of the
outstanding amount of the past due claim
0.50 0 0
2. Claims fully secured against residential property that are past
due for more than 90 days and/or impaired specific provision
held there-against is less than 20% of outstanding amount
3. Loans and claims fully secured against residential property
that are past due by 90 days and /or impaired and specific
provision held there-against is more than 20% of outstanding
amount
Total 7.53 11.27
Past Due Claims (BDT Crore)
50. Account
Name
Total
Outstanding
(TO)
(1)
CL
Status
(2)
Interest
Suspense
(3)
Security
Type
(4)
Amt. for
Provision
(5) = 1-3
Provision
(6)
Specific
Provision
(7) = (5) x
(6)
Net of
Specific
Provision
(8) = (5)-(7)
RW
(9)
(7)/(1)
RWA
BALARK 419,619.02
Doubt
Full
69,600.00 Unsecured 350,019.28 50% 175,009.64 175,009.64
1.00
(41.71%)
175,009.64
Lina Paper
Mills
Ltd
66,635,357.36 SMA 3,131,516.00 Unsecured63,503,841.03 5% 3,175,192.05 60,328,648.9
1.50
(4.77%)
90,492,973.47
Garbco
Ltd
21,446,406.96 SS 2,865,578.00 Unsecured18,580,828.89 20% 3,716,165.77 14,864,663.1
1.50
(14.81%)
22,296,994.67
Adnan
Sweaters
Ltd
23,464,610.17 BL 1,353,577.00 Unsecured22,111,033.30 100% 22,111,033.30 0
0.50
(94.23%)
0
Total 111,965,993.5 75,368,321.7 112,964,977.2
Past Due
52. Exposure type Exposure RW RWA
Other Asset ( interest receivable,
suspense account, stamp in hand,
stock of stationary, prepaid
expense, excise duty adjustment
etc.)
10.2 1 10.2
Staff Loan 8.00 0.20 1.6
Total 18.20 11.8
All Other Assets (BDT Crore)
53. Trade related contingencies - LC
Trade related contingencies - BTB
Performance related contingencies - Bank Guarantee
Direct credit substitutes- LC Cash Acceptance
Direct credit substitutes - BTB Acceptance
- Credit Conversion Factor (CCF) for TRC = 20%
Therefore,
Credit Exposure = (Notional amount – Margin, if any) X CCF
OBS -Trade related Contingencies (TRC)
54. SL Types CCF
Notional Amount
(Let ,Margin=0)
Credit
exposure
1 Claims on BD Govt & BB
2
Claims on Other Sovereign and central
banks
3 Claims on BIS,IMF,ECB
4 Claims on MDBs
5 Claims on PSE
6 Claims on Banks
i) Maturity less than 3 months
Account Name
IIDFC Bank Guarantee 50% 1.31 0.65
ii) Maturity over 3 months
7
Claims on Corporate
Accounts name
Bashundhara Steel LC 20% 3.65 0.73
Hamid Fabrics Ltd BTB 20% 5.54 1.10
Alim Knit (BD) Ltd Bank Guarantee 50% 0.23 0.12
Mother Textile Ltd LC cash Acceptance 100% 3.67 3.67
Hamid Fabrics LTD Unit 2 BTB Acceptance 100% 11 11
Total 25.4 17.27
8 Claims on Retail & SME
9 Consumer Loan
10 All other Asset
OBS -Trade related Contingencies
55. OFF Balance Sheet Exposure
Exposure Type Rating RW Exposure RWA
Claims on Bangladesh Government and Bangladesh Bank 0 0 0
Claims on other Sovereigns & Central Banks 0 0 0
Claims on BIS,IMF,ECB 0 0 0
Claims on Multilateral Development Banks (MDBs) 0 0
Claims on Public Sector Entities (other than Government) in
Bangladesh
Unrated 0.5 0 0
Claims on Banks
Maturity Over 3 months Unrated 1.0 0 0
Maturity up to 3 months Fixed RW 0.2
0.00
0.00
Claims on Corporate Unrated 1.25
17.27
21.58
Against Retail and SME 0.75 0.65 0.487
Consumer Loan
All Other Assets
Total 17.92 22.07
56. Particulars Exposure RWA
ON B/S 120.08 139.25
Off B/S 17.92 21.71
Total 138 160.96
Economic Capital 10% of RWA 16.09
Capital for Credit Risk
57. It is the risk that the value of on and off-balance sheet positions of a financial institution will be
adversely affected by movements in market rates or prices such as interest rates, foreign
exchange rates, equity prices, credit spreads and/or commodity prices resulting in a loss to
earnings and capital.
Components of Market Risk:
A . Interest Rate Related instruments
B. Equities
C. Foreign Exchange Position
Market Risk
58. Operational risk is defined as the risk of loss resulting from inadequate or failed internal
processes, people and systems or from external events. This definition includes legal risk, but
excludes strategic and reputation risk
Capital Charge of Operational Risk
Capital Charge = 15% x (Average Gross Income of Last Three Consecutive Years)
Year 2012 2013 2014 Average GI
Capital
Charge
Net Interest Income 87.01 116.67 88.77
Net noninterest income 157.39 212.36 218.69
Interest Suspense 10.00 11.00 12.00
Gross Income 254.40 340.03 319.46 304.63 45.69
BDT Crore
Operational Risk
62. Overall Scenario of ICAAP Document
Sl. No. Particulars of Risks
Capital Requirement
(Tk. Crore)
1 Credit Risk 38.03
2 Market Risk 0.17
3 Operational Risk 3.14
A) Minimum Capital Requirement under Pillar-1 400.00
1 Residual Risk 1.74
2 Concentration Risk 4.00
3 Liquidity Risk 0.00
4 Reputation Risk 8.00
5 Strategic Risk 4.00
6 Settlement Risk 0.00
7 Evaluation of Core Risk Management 0.00
8 Environmental & Climate Change Risk 0.00
9 Other material risks 0.11
B) Additional capital required under Pillar-2 17.85
C) Total Capital Requirement (A+B) for the year 2013 414.71
64. Particulars Amount
Outstanding Amount of Total Loans & Advances as on 31.12.13 183.14
Outstanding Amount of Total Loans & Advances Eligible for
Capital Charge
19.20
Total Provision (General & Specific) 0.19
MCR against Total Loans & Advances 1.62
Total Value of Qualified Financial Collateral 0.00
Total Base for Capital Charge 17.38
Capital Requirement against Documentation Error 1.74
Capital Requirement against Valuation Error 0.00
Capital Requirement against Residual Risk 1.74
Capital Charge for Residual Risk
Fig. in Crore
66. Concentration Risk
Rating Point
Homogenous 0
Satisfactory 1
Moderate 2
High 3
Aspects of concentration Total Rating Point Required Capital
Sector wise exposure 10 4
Division wise exposure (Geographic Concentration) 9 0
Group wise exposure 8 0
Single borrower wise exposure 9 0
Instrument (Financial Securities) wise Investment 10 0
Sector wise Investment in Listed Instruments 0 0
Currency wise Investment of Foreign Exchange 9 0
Capital Requirement against Concentration Risk (Tk. In Crore) 4
If Total Rating Points exceed 9, then we
have to charge additional capital.
Required Capital= MCR * 1%
Note: Instrument (Financial Securities)
wise Investment & Currency wise
Investment of Foreign Exchange are
excluded from Capital Charge.
68. Liquidity Risk
Types Particulars
Annual
Average
Regulator
y
Standard
MCR
(a)
Capital
requirement as
% of MCR
(b)
Capital
Requirem
ent (a+b)
Funding Liquidity
Risk
Cash Reserve Requirement (CRR) 10.97% 6%
400
2% 0
Market Liquidity Risk
Statutory Liquidity Requirement
(SLR)
31.12% 19% 2% 0
Medium Term Funding Ratio
(MTFR)
309.26%
>30% -
45%
1% 0
Maximum Cumulative Outflow
(MCO)
10.80% < 20% 1% 0
Advance Deposit Ratio (ADR) 36.32% 81.00% 1% 0
Liquidity Coverage Ratio (LCR) N/A 2% 0
Net Stable Funding Raito (NSFR) N/A 1% 0
Capital Requirement against
Liquidity Risk
0
Fig. in Crore
69. REPUTATION
RISK
Fig. in Crore
Note: If the rating grade of any bank is below 2 of BB rating grade, bank will be required to maintain
additional capital requirement which will be the multiplication of the MCR with 20% of minimum CAR.
70. • CAMELS rating
• Operating expenses
• Classified loans ratio
• Recovery of classified loan
• Written-off loans
• Interest waiver
• Base rate calculation methodology
• Strategic plans
• Rescheduling of loans and advances
STRATEGIC RISK
71. Strategic Risk
CAMELS rating: If the rating of any bank falls below 2, Capital
Requirement = MCR*1% = 0 (not received from BB)
Operating expense: (Operating expense/Operating Income=
82.60%)>45%, Capital Requirement= MCR*1% = 4.00
Classified loan ratio: (Classified loans/Total Loan)> 5%, Capital
Requirement = MCR*1% = 0
Recovery of Classified loan: (Classified loan Recovery/Total
Classified loan) <20%, Capital Requirement = MCR*1% = 0
Fig. in Crore
72. Strategic Risk
Written-off Loan: (Written-off loan/Total Classified loan) > 15%, Capital
Requirement = MCR*1% = 0
Interest Waiver: (Interest waiver/Total Classified loan) > 5%, Capital
Requirement = MCR*1% = 0
Rescheduling: If any loan accounts rescheduled for more than 3 times,
capital charge will be imposed against the loan account by netting
Provision, MCR, value of financial collateral and capital charge against
residual risk(if any). Capital charge will be 10% of Netting amount = 0
Fig. in Crore
73. SETTLEMENT RISK
- Settlement risk arises when an executed transaction is not settled
as the standard settlement system suggests or within
predetermined method.
- Non-receiving or delayed receiving of receivable bills (foreign
& domestic) will consider to evaluate settlement risk.
- Capital Requirement against Settlement Risk = 0.00
74. Settlement
Risk
• Non-receiving or delayed
receiving of receivable bills
(foreign & domestic) > 10%
of total loans and advance
capital charge will be
imposed as 1% of MCR
75. Evaluation of Core Risk
Core Risk Rating MCR
Capital
requirement
CRM 1
400.00
0.00
ALM 1 0.00
ICC 1 0.00
AML 1 0.00
FEX 1 0.00
ICT 2 0.00
Total Capital Requirement 0.00
Fig. in Crore
Note: No capital charge will be imposed for risk rating of 1(Strong) and 2(Satisfactory), if 3(fair),
4(Marginal) and 5(unsatisfactory) bank will be required to maintain additional capital requirement
which will be the multiplication of the MCR with 15% of minimum CAR.
76. ENVIRONMENTAL AND CLIMATE CHANGE RISK
To evaluate this
risk, Sector
Environmental
Due Diligence
(EDD) check list
should be done by
the concerned.
High will be
considered for
capital charge
against this risk.
On the basis of
this check list
concerned will
rate the client.
77. Environmental & Climate Change Risk
Capital charge will be
imposed only for “High
Environmental Risk rating”.
Base for capital charge =
Outstanding amount-
Provision-MCR-Financial
collateral-Capital charge
against residual risk(if any)-
capital charge against
strategic risk(if any).
Capital charge =10% x base
for capital charge
If 50% or more of the loans
which are eligible for EnvRR
are found unrated in the
reporting year, the SREP team
of Bangladesh Bank will
determine the additional
capital charge appropriate for
the bank
78. Particulars Amount
Outstanding Amount of Total Loans & Advances 183.14
Outstanding Amount of Total Loans & Advances Eligible for
Capital Charge
7.74
Total Provision (General & Specific) 0.77
MCR against Total Loans & Advances 0.97
Total Value of Qualified Financial Collateral 7.00
Capital Requirement against Strategic Risk 0.00
Capital Requirement against Residual Risk 0.00
Total Base for Capital Charge 1.11
Capital Requirement against Environmental Risk 0.11
Capital Charge for Environmental and Climate
change Risk
Fig. in Crore
79. Overall Scenario of ICAAP Document
Sl. No. Particulars of Risks
Capital Requirement
(Tk. Crore)
1 Credit Risk 38.03
2 Market Risk 0.17
3 Operational Risk 3.14
A) Minimum Capital Requirement under Pillar-1 400.00
1 Residual Risk 1.74
2 Concentration Risk 4.00
3 Liquidity Risk 0.00
4 Reputation Risk 8.00
5 Strategic Risk 4.00
6 Settlement Risk 0.00
7 Evaluation of Core Risk Management 0.00
8 Environmental & Climate Change Risk 0.00
9 Other material risks 0.11
B) Additional capital required under Pillar-2 17.85
C) Total Capital Requirement (A+B) for the year 2013 414.71
80. Common Equity / Core Capital has to be increased by ensuring expected
profit;
Asset-Liability Management should make stronger to ensure liquidity
coverage;
Increase the number of rated clients to reduce capital requirement and
enhance Capital Adequacy Ratio (CAR)
Assessment of capital under revised directions should be performed to
determine bank’s status in the respective compliance areas;
Improvement of human resources quality should be ensured to cope up
Basel-III norms; etc.
Preparatory Course of Actions
Editor's Notes
Claims: Exposures such as deposits (including foreign currency), placements, investments, loans and advances underlying with counterparties.
