Prudential Regulation For Banks and
Prudential Regulation For Banks and
1
POLICY ON CAPITAL ADEQUACY OF BANKS
Capital base
Regulatory capital will be categorized into three tiers: Tier 1,
Tier 2, and Tier 3.
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
Tier 3 capital
Tier 3 capital called ‘Additional Supplementary
Capital’, consists of short-term subordinated debt
(original maturity less than or equal to five years
but greater than or equal to two years) would be
solely for the purpose of meeting a proportion of the
capital requirements for market risk.
Capital for foreign banks
For foreign banks operating in Bangladesh, Tier 1
capital consists of the following items:
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Minimum Capital Requirements (MCR)
And as well as
8
MCR…
9
Approaches for calculating Risk Weighted
Assets
10
RWA for Credit Risk…
According to the standardized approach,
the risk weight will be based on the credit
rating made by External Credit
Assessment Institutions (ECAIs).
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Credit Risk - Definition
Credit Risk:
Credit risk is the potential that a bank borrower or
counterparty fails to meet its obligation in
accordance with agreed term.
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Capital Charge against Market Risk
This section is concerned with the calculation of
capital charges for market risk on Trading Book
exposures.
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Capital Charge against Operational Risk
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POLICY ON LOAN CLASSIFICATION AND
PROVISIONING
Otherwise, bank shall take all legal steps to realize the loan, make
necessary provision and take measures to write-off. The
rescheduling shall be for a minimum reasonable period of time.
a) CreditRisks,
b)Asset and Liability/Balance Sheet Risks,
c) Foreign Exchange Risks
d)Internal Control and Compliance Risks and
e) Money Laundering Risks.
THE NEGOTIABLE INSTRUMENTS ACT,
1881
An Act to define and amend the law relating to
Promissory Notes, Bills of Exchange and
Cheques.
Promissory Note - A “promissory note” is
an instrument in writing (not being a bank-
note or a currency-note) containing an
unconditional undertaking, signed by the
maker, to pay a certain sum of money only
to, or to the order of, a certain person, or to
the bearer of the instrument.
THE NEGOTIABLE INSTRUMENTS ACT,
1881
Bill of Exchange – As per statutory
definition, “bill of exchange” is an instrument
in writing containing an unconditional order,
signed by the maker, directing a certain
person to pay a certain sum of money only
to, or to the order of, a certain person or to
the bearer of the instrument.
A cheque is a special type of Bill of Exchange.
It is drawn on banker and is required to be
made payable on demand.
NEGOTIABLE INSTRUMENTS
Provisions in respect of Cheques - A “cheque” is a bill
of exchange drawn on a specified banker and not
expressed to be payable otherwise than on demand.
‘Cheque’ includes electronic image of a truncated cheque
and a cheque in electronic form.
Drawer, Drawee.
The maker of a bill of exchange or cheque is
called the drawer ";