Cash Reserve Ratio (CRR) requires commercial banks to hold a minimum amount of customer deposits in cash reserves with the central bank. Statutory Liquidity Ratio (SLR) requires banks in Bangladesh to maintain reserves in gold, cash and other approved securities set by Bangladesh Bank to regulate credit growth. Tier 1 capital consists of common stock and retained earnings that provide core financial strength from regulators' perspective, while Tier 2 capital includes other reserves and debt considered less reliable.

1. Cash Reserve Ratio (CRR) is a specified minimum fraction of the total deposits of customers, which
commercial bankshave toholdas reserveseitherincashor as depositswiththe central bank. CRR is set
according to the guidelines of the central bank of a country.
SLR: It stands for Statutory Liquidity Ratio and is prescribed by Bangladesh Bank as a ratio of cash
deposits that banks have to maintain in the form of gold, cash, and other securities approved by
Bangladesh Bank. This is done by Bangladesh Bank to regulate growth of credit in India. These are un-
encumbered securities that a bank has to purchase with its cash reserves. The present SLR is 13%, but
Bangladesh Bank has the power to increase it, if it so deems fit in the interest of the economy.
Tier 1 capital is the core measure of a bank's financial strength from a regulator's point of view. It is
composedof core capital, whichconsistsprimarilyof commonstockanddisclosedreserves(or retained
earnings), but may also include non-redeemable non-cumulative preferred stock
Tier 2 capitals is supplementary bank capital that includes items such as revaluation reserves,
undisclosedreserves,hybrid instruments and subordinated term debt. A bank's reserve requirements
include its Tier 2 capital in its calculation, but it is considered less reliable than its Tier 1 capital.
What is a 'Bank Rate?'
A bank rate is the interest rate at which a nation's central bank lends money to domestic banks. Often
these loans are very short in duration. Managing the bank rate is a preferred method by which central
banks can regulate the level of economic activity. Lower bank rates can help to expand the economy,
whenunemploymentishigh,byloweringthe costof fundsforborrowers.Conversely,higher bank rates
help to control in the economy, when inflation is higher than desired.
The bank rate can also refer to the interest rate which banks charge customers on loans.
What is the 'CAMELS Rating System?'
The CAMELS rating system is an international bank-rating system where bank supervisory authorities
rate institutions according to six factors
The six factors examinedare asfollows:
C - Capital adequacy
A - Assetquality
M - Managementquality
E - Earnings
L - Liquidity
S - SensitivitytoMarketRisk
Bank supervisory authorities assign each bank a score on a scale of one (best) to five (worst) for each
factor.

2. Basel II
Basel II is the second of the Basel Accords, (now extended and effectively superseded [clarification
needed] byBasel III),whichare recommendations on banking laws and regulations issued by the Basel
Committee on Banking Supervision.
Basel II, initially published in June 2004, was intended to create an international standard for banking
regulators to control how much capital banks need to put aside to guard against the types of financial
and operational risks banks (and the whole economy) face. One focus was to maintain sufficient
consistency of regulations so that this does not become a source of competitive inequality amongst
internationally active banks. In theory, Basel II attempted to accomplish this by setting up risk and
capital managementrequirementsdesigned to ensure that a bank has adequate capital for the risk the
bankexposes itself tothrough its lending and investment practices. These rules mean that the greater
riskto whichthe bank isexposed,the greaterthe amountof capital the bankneedstoholdto safeguard
its solvency and overall economic stability.
 The first pillar
The first pillar deals with maintenance of regulatory capital calculated for three major components of
risk that a bank faces: credit risk, operational risk, and market risk.
 The second pillar
This is a regulatory response to the first pillar, giving regulators better 'tools' over those previously
available.It also provides a framework for dealing with systemic risk, pension risk, concentration risk,
strategic risk, reputational risk, liquidity risk and legal risk
 The third pillar
This pillar aims to complement the minimum capital requirements and supervisory review process by
developing a set of disclosure requirements that will allow the market participants to measure the
capital adequacy of an institution.
Capital Adequacy Ratio (CAR), also known as Capital to Risk (Weighted) Assets Ratio (CRAR), is
the ratio of a bank's capital to itsrisk.National regulatorstracka bank'sCAR to ensure thatit can absorb
a reasonable amount of loss and complies with statutory Capital requirements. It is a measure of a
bank's capital.
Minimum CAR requirement might be 10%...