To cope with the international best practices and to make the bank’s capital more risk sensitive aswell as more shock resilient, ‘Guidelines on Risk Based Capital Adequacy (RBCA) for Banks’(Revised regulatory capital framework in line with Basel II) have been introduced from January01, 2009 parallel to existing BRPD Circular No. 10, dated November 25, 2002. At the end of parallel run period, Basel II regime has been started and the guidelines on RBCA has come fullyinto force from January 01, 2010 with its subsequent supplements/revisions. Instructionsregarding Minimum Capital Requirement (MCR), Adequate Capital, and Disclosure requirementas stated in these guidelines have to be followed by all scheduled banks for the purpose of statutory compliance.With a view to ensuring transition to Basel II in a non-disruptive manner, Bangladesh Bank (BB)adopted a consultative approach. In this process, a high-level National Steering Committee (NSC)headed by a Deputy Governor of BB was formed comprising central bank and commercial banks’officials for working on the policy decisions. Furthermore, there is a Coordination Committee(CC) headed by an Executive Director of BB to assist the NSC in decision-making. AnImplementation Cell under Banking Regulation and Policy Department (BRPD) has been formedto assist and carry out the instructions of NSC and CC on Basel II implementation. During the parallel run period, CC has collected feedback on these guidelines. The NSC in its 4
meetingheld on December 22, 2009 has recommended for full enforcement of these guidelines asstatutory compliance subject to some adjustment in MCR and Risk Weight (RW). The NSC hasunanimously emphasized on drawing enforceable action plans for credit rating of the banks’counterparties, adopting Supervisory Review Process (SRP) for calculating adequate capital and acapital growth plan.Accordingly, these guidelines have been reviewed on the basis of feedback received. Now, therequired adjustments, revisions and supplements have been included in the guidelines. Scheduled banks will follow the instructions contained in the revised ‘Guidelines on Risk Based CapitalAdequacy for Banks’. These guidelines are articulated with the following areas, viz;A) Introduction and constituents of Capital, B) Credit Risk, C) Market Risk, D) Operational Risk,E) Supervisory Review Process, F) Supervisory Review Evaluation Process, G) MarketDiscipline, H) Reporting Formats, and I) Annexure.These guidelines will be able to make the regulatory requirements more appropriate and will alsoassist the banks to follow the instructions more efficiently for smooth implementation of theBasel II framework in the banking sector of Bangladesh.
Abu Hena Mohd. Razee Hassan
Executive Director Bangladesh Bank