“Implementation of Basel III Accords in Dutch-Bangla Bank Limited: Risk Based Capital Adequacy Ratios Requirement of Bangladesh Bank”
Abstract
This internship report is based on the successful 3 month internship program successfully completed by the Dutch-Bangla Bank Limited (DBBL) under the General Banking, Foreign Exchange Division from 12 November, 2018 to 05 February, 2015. One of the requirements is the BBA program of United International University.
My faculty advisor helped me to choose the topic “Implementation of Basel III Accords in Dutch-Bangla Bank Limited: Risk Based Capital Adequacy Ratios Requirement of Bangladesh Bank”. It was complex for me, but very internationally important for the bank. It was the most attracted as the value of acquiring knowledge.
The Bangladesh Bank (BB) is the managing body of all commercial banks in this country. To be consistent with international standards for controlling the banking industry (Basel Accord), BB and Basel III are related to the risk-based capital equity guidelines. All banks will have to follow these guidelines from 1st January 2015 and the statements will be implemented. The guidelines are formed in aspects: Minimum Common Equity Tier 1, Capital Conservation Buffer, Minimum Tier 1 Capital Ratio, Total Risk-weighted Asset, Leverage Ratio, Liquidity Coverage Ratio, and Net Stable Funding Ratio. In order to improve the efficiency of banking sector to absorb the shocks arising from financial and economic pressure, grow standards and capital levels by being able to absorb both the losses on the basis of concerns of an ongoing concern and anxiety, Risk coverage increase in capital structure.
Since 2014 Bangladesh Bank, the original Basel III regime forces itself to fund the 4.5% of the risk-weighted assets of the general bank. Since 2015, the lowest common equity level 1 (CE1) ratio of 4.5% must always be maintained by the bank. Basel III to compulsory "Capital Conservation buffer" equivalent to 2.5% of risk-weighted assets. Considering 4.5% CET 1 capital ratio, banks should keep the capital ratio of 2017 to 7% CET1. Minor CRAR, besides capital, Reserve buffer (CCB) @ 2.50% should be maintained as CET1 Basel III has a "counter-cyclical buffer" that allows 2.5% of the additional capital to increase the high credit growth of national regulators. This buffer level is between 0% and 2.5% of RWA and it must be filled with CET1 capital. Basel III will leverage ratio increase 3%, Liquidity Coverage Ratio bank core asset 30 days convert can be that positing want to 100% and Net Stable Funding Ratio liquidity requirement from the minimum amount of funds of the bank's funds related to the liquidity profiles of the asset as well as the balance sheet commitment want to 100%.
Capital planning is considered as an important part of the bank's risks. One pressure test is one of the measurements of technique of possible damage assessment or strategy. It's just a kind of evolution. Some of the financial situations of the bank are given adverse "shock" and are likely to be practiced in the worst case scenario. Bangladesh Bank provides a reporting format for all the banks under which the work is done. Banks must comply with regulatory rules; Otherwise, BB can impose punishment and penalty according to the Bank Company Act of 1991.
Dutch-Bangla Bank Limited (Bank) is a scheduled commercial bank. Bank, DBBL, a joint venture between the local Bangladeshi groups, commercial banks Dutch-Bangla Bank Limited is an automatic banking system, the first and only local bank in Bangladesh. DBBL follow to Bangladesh Bank Risk Based guidelines at time 2015. DBBL have all major of Basel III requirements in 2015. DBBL is smoothly implementing Basel III. DBBL have net common equity Tier 1 (CET1) 2017 16.5 billion taka BB through ratio 5.5% and DBBL requirement 9.2%. Total Tier 1 risk-weighted asset BB have given 5.5% and DBBL requirement 2017 9.2%. DBBL there have total risk-weighted asset 18billion taka to ratio 15.5% and BB bank requirement given 11.25% in 2017. So there is a surplus of DBBL its capital is covered by the majority of the paid-up capital of CET 1 and Tier 1 capital which is of high quality and Main part.
Basel III determined all Bangladesh Bank has been accepted by the encouragement by all scheduled banks. Some Bangladeshi Bank has Capital to Risk Weighted Asset Ratios in January 2015. Although our country has fewer banks International Market Exposure, Basel III will be the international guide protects them towards any unexpected economic condition of huge and abroad.
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