Bangladesh: BRPD Circular No. 10 - Master Circular on Capital Adequacy of Banks, November 2002

Publication Date: Nov 2002
Published by: Dhaka, Bangladesh: Bangladesh Bank
Document Type: Other (PDF)

View this Document (49 KB)   Email this Document

Circular issued by Bangladesh Bank incorporating provisions assessing capital adequacy of banks on the basis of risk-weighted assets.

This “Master Circular No.10”, issued by the Bangladesh Bank (BB) sets out arrangements for assessing the capital adequacy of banks on the basis of risk-weighted assets rather than the capital-liabilities approach. In order to enable the banks to have all existing instructions on the subject in one place, this circular incorporates all past instructions, while also including a few new instructions.

The circular:

• Categorizes “capital” into two tiers:
  • Core capital that comprises the highest quality capital elements;
  • Supplementary capital that contribute to the overall strength of a bank.
• States that:
  • Each bank will maintain a ratio of capital to risk-weighted assets of not less than 9% with at least 4.5% in core capital;
  • Banks should weigh both balance sheet and off-balance sheet exposures according to their relative risk.
• Identifies four categories of risk weights - 0, 20, 50 and 100 percent.
• Seeks the conversion of off-balance sheet transactions into balance sheet equivalents for the purpose of assessing capital adequacy before assigning a risk weight.

The circular concludes with the following advice for banks on implementation:

• Banks should assess their capital positions on a half-yearly basis;
• They should report the same to the “Department of Banking Operation and Development” of BB;
• Banks should contact the “Banking Regulation and Policy Department” of BB in case of any confusion or ambiguity.