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Disclosures on Risk Based Capital Requirement under Pillar-III of

Basel-II for the year ended December 31, !!"#

Disclosure $%er%ie&
This following detailed qualitative and quantitative disclosures are provided in
accordance with the guidelines of Bangladesh bank for Risk Based Capital Adequacy
Requirement under Basel-II issued through circular on ecember !"# $%%&' This is
intended to provide users an insight about the various risks e(posures to which the bank
is focused and maintenance of adequate capital against them' The users will also be able
to compare the bank)s performance within the banking industry'
BA*IC Bank has an approved market disclosure policy to disclose adequate information
to the users in accordance with the suggestions made by Bangladesh Bank which is
consistent with Bangladesh Accounting *tandards +BA*,# Bangladesh *tandards on
Auditing +B*A,'
'a(or Requirements of Ban)ladesh Bank* )uidelines for Basel-II#
-illar-I. /inimum Capital Requirement. Bank shall maintain minimum capital against
potential risks +Credit Risks# /arket Risks# and 0perational Risks, which will be at least
"%1 of total risk weighted assets' At present all banks operating in Bangladesh is
instructed to follow *tandardi2ed approach for Credit Risk and /arket Risk and Basic
Indicator Approach for 0perating Risk' Capital Adequacy Assessment and /aintenance
shall be submitted to Bangladesh Bank on 3uarterly basis'
-illar-II. *upervisory Review. The banks shall have a process for assessing overall
capital adequacy in relation to their risk profile and a strategy for maintaining their
capital at an adequate level' Adequate capital shall be more than or equal to "%1 of risk
weighted assets'
Bank should develop an Internal Capital Adequacy Assessment -rocess +ICA-, for
assessment and maintenance of adequate capital'

-illar-III. /arket iscipline. -urpose of /arket discipline is to establish more
transparent and disciplined financial market so that stakeholders can assess the position
of a bank regarding holding of assets and to identify the risks relating to that assets and
capital adequacy to meet the probable loss of assets' Banks shall develop an approved
market disclosure policy and publish the same at least once in a year along with annual
financial statements and also through website'
+he Disclosure#
Bank)s total asset mainly consists of loans and advances# investment in government
securities and money market placements which is increasing gradually' 3uality of this
asset is standard and percentage of non performing asset is also at tolerable level'
Comments on nature of assets#
Bank) s assets may be classified into several categories such as Banking Assets and 4on
Banking Assets# Trading Book Assets and Banking Book Assets# 5arning Assets and
4on 5arning Assets'
-arnin) ,ssets .+radin) book asset, Bankin) book asset, etc/#
5arning Asset portfolio of the Bank consists of the followings.
a' 6oans and Advances
b' Investment in 7overnment *ecurities
c' Investment in 5quity *hares
d' Investment in other approved *ecurities
e' Investment in Call and Term -lacement with Banks and 8inancial
f' Balance with 0ther Banks +*T account# 8C account ,
0on-earnin) assets .Cash, Cash reser%e &ith BB, etc1/#
4on 5arning Asset portfolio of the Bank consists of the followings.
a' Cash and Cash 5quivalents including foreign currency
b' Balance with Bangladesh Bank Current Account for maintaining CRR
c' 4on Current Assets including 8urniture and 8i(tures# /achine and
5quipments# 9ehicles and 6eased Assets'
d' 0ther assets including receivables'
Definition of Default and Classified ,ssets#
The Bank follows classification of loans and advances as per applicable circular of
Bangladesh Bank' According to Bank Companies Act-"::" the definition of
Classified 6oan is as follows.
The loans and advances along with interest accrued or a part thereof remaining
overdue as per definition of Bangladesh Bank for %; months or more is termed as
efault or Classified 6oans'
,ddition2Reduction on Classified ,ssets#
Bank)s non performing asset has increased slightly in the year $%%: comparing to
that of $%%&' 7lobal economic recession has mainly contributed to such increase'
Policies and processes for protectin) assets a)ainst Core Risks inherent
&ith bankin) acti%ities#
The Bank has developed its own core risks +Credit Risk# 8oreign 5(change Risk#
Asset 6iability /anagement Risk# /oney 6aundering Risk and Internal Control
and Compliance Risk, manual in line with core risks guidelines of Bangladesh
Bank' As per these guidelines Asset 6iability Committee +A6C0, regularly
reviews bank)s asset and liability position and suggests appropriate course of
actions for mitigating any type potential risks'
Bank has a Risk /anagement <nit to manage different types of risks' It is also
comitted to adhere to core risk guidelines to protect its assets from all sorts of risks'
Bankin) and +radin) Book ,sset#
Amount in Crore
,1 Bankin) Book ,ssets ,moun
" Cash in hand = Balance with BB +e(cluding 8C, 13133
$ /oney at call 141!!
! Investment 35316!
a' 7overnment >?T/ T'Bond# -ri2e Bond ":&';!
b' 3ualifying +Claims on Banks# etc, @;A'$@
c' 0thers +-rivate Investment, %';$
A 6oans = advances. "5116
a' Classified.
*ubstandard $"'&&
oubtful ":'@B
Bad and 6oss ::'B:
b' <nclassified
*pecial /ention Account $!'"&
*tandard $B;"'B!
@ Risk Ceighted Assets.
a' Below "%%1 RC &%"'%@
b' "%%1 RC !A$'@%
c' Above "%%1 RC $"AA'B%
; Rated *tatus.
a' Rated Assets B"'&:
b' <nrated Assets !:A:'@&
B 0ther assets +Including 8i(ed Assets, "5176
A' Total Banking Book Assets +"D$D!DADB, 7!1173
+radin) Book ,ssets#
" 8C held in hand !16!
$ 8C held in BB = 4ostro account 64117
! Investment +trading, 7311
a' 7ovt'+part of govt' ?T/ if held above the required
*6R amount,
b' ?8T A$!'B:
c' A8* +if any,-*hare of listed companies &'!!
B' Total Trading Book Assets +"D$D!, 7"!135
+otal ,ssets .,8B/ 76113
Credit Risk on Bankin) Book
Credit Risk is the probability of loss arising from counterparties) failure to meet
repayment obligation' Credit risk mainly arises from direct loans and advances# Trade
8inance Business and 0ff Balance *heet e(posures'
'ethods used to measure credit risk#
As per guidelines of Bangladesh Bank for Risk Based Capital Adequacy for Banks
*tandardi2ed Approach for Credit Risk measurement has been applied' *tandardi2ed
approach requires risk weight based on risk assessment done by 5(ternal Credit
Assessment Institutions recogni2ed by Bangladesh Bank' Credit e(posure not rated
by any 5CAI will get fi(ed weight as per *tandardi2ed approach'

Credit Risk 'ana)ement system#
Bank has Credit risk /anual prepared inline with the credit risk of core risks
guidelines of Bangladesh Bank' /anual contains the details of policies and
procedures of bank)s credit operation' Bank has different Credit departments such as
Industrial Credit ivision# Commercial Credit ivision# /icro Credit and Cholesale
8inance ivision and Trade 8inance ivision' Credits sanctioned from these
departments go through a series of analysis of financials and feasibility of the
proEects' Bank also has Credit Administration ivision and Recovery and 6egal
Issues ivision' Credit Administration ivision ensures and monitors the compliance
with credit policies# procedures and other rules of Bangladesh Bank' Recovery and
6egal Issues ivision ensures timely recovery of all assets and provide legal support
to any dispute'

Policies and processes for collateral %aluation and mana)ement.
Bank has clear stipulation in the credit manual about the eligibility of collateral for
credit proposals' Collaterals of fi(ed assets including land# building and factory
premises are physically visited by the bank)s credit officers and valued by independent
professional valuation firm before sanctioning the loans and advances' All the
documents relating to the valid title of the property are checked by the penal lawyers of
the bank' /ain types of collaterals taken by the bank.
a, Cash Collaterals
b, Registered /ortgage of 6and and Building in Commercial# Industrial
and Residential sectors
c, *tock of inventory# Accounts Receivable and ?ypothecation of
Total credit portfolio has been divided into "@ sub >sectors and it regularly monitored
that a particular sector does not get too much of our total credit e(posures' In addition the
Bank has a mandate of providing at least @%1 of its loan able fund to *mall and /edium
*cale Industries' Therefore credit concentration is automatically managed'
9uantitati%e disclosure of credit risk#
Amount in Crore

A, Total 5(posures of Credit Risk
" 8unded.
a, omestic A%$"'AB
b, 0verseas %
$ 4on-8unded
a, omestic !B&'B:
b, 0verseas %
! istribution of risk e(posure by claims
A' Claims on sovereigns and central banks A@A'@A
B' Claims on other official entities @B'%:
C' Claims on banks and securities firms B;:'&@
' Claims on corporate +/edium 5nterprise loans need
to be shown separately,
5' Claims included in the retail portfolio = small
enterprises +consumer loan need to be shown
8' Claims secured by residential property A;:'B$
7' Claims secured by commercial real estate $$B':B
?' Consumer "@'!&
I' 0ther Categories.
> -ast due loansF4-6 +4et of *pecific -rovision, ""$'$&
- 0ff-balance sheet items !B&'B:
A Credit Risk /itigation
Claims secured by financial collateral
4et e(posure after the application of haircuts'
Claims secured by eligible 7uarantee
'arket risk on +radin) Book
/arket risk is the possibility of losing assets in balance sheet and off balance sheet
position arising out of the volatility in market variables i'e'# interest rate# e(change rate
and price'
Bank uses standardi2ed approach to calculate market risk for trading book e(posure as
per instruction of Bangladesh Bank' Trading book e(posures consists of position in
financial instruments held with trading intent' 7enerally investment in ?eld for Trading
category is main part of trading book e(posures'
Trading steps are taken after considering regular update about the market' Bank
diversifies its assets in various categories of trading assets' Bank has also a limit policy
to mitigate unwanted market risk factors'
3uantitative isclosure.
*6 40
The capital requirements for.
Amount in Crore
" Interest rate riskG :':A
$ 5quity position riskG A':"
! 8oreign e(change riskG and "'@:
Commodity risk
$perational risk
0perational Risk is defined as the risk of loss resulting from inadequate or failed
internal processes# people and system or from e(ternal events'
Bank has internal manuals on Internal Control and Compliance# ?uman Resource where
details of operational policies# procedures and ?R related activities have been stated'
Bank regularly monitor and reviews the performance of e(ecutives both quantitatively
and qualitatively through analysis of achievement of business target in various
parameters and behavioral# tactical and leadership aspects through confidential
evaluation process'
Bank is running through centrali2ed real time online system' 5(ternal events like natural
disaster and unauthori2ed access to Bank)s centrali2ed computer system can affect the
bank significantly' Bank has alternative arrangement for disaster recovery and a highly
qualified team of IT e(perts is working to prevent any type of unauthori2ed access'
Bank has an Audit and Inspection ivision and Compliance ivision' Audit and
Inspection team regularly work to detect and remove procedural flaws# error and fraud'
Compliance ivision is working to ensure all sorts of regulatory and policy compliance
to help smooth operation and maintain consistency and thus reduce risk'

Bank uses Basic Indicator approach for calculating operational Risk as per instruction of
Bangladesh Bank'
The capital requirements for. Amount in Crore
H 0perational Risk !"'!%
'aintenance of :pecific Pro%ision
Bank determines *pecific -rovision on 4on performing assets as per relevant circulars
of Bangladesh bank and maintains adequate provision as required which is quarterly
reported to Bangladesh Bank'
As per instruction of Bangladesh Bank specific provisions is calculated and maintained
under the following categories of classified assets.
*6 4on -erforming Assets Categories -ercentage of
*pecific -rovision
" *ubstandard loans and advances $%1
$ oubtful loans and advances @%1
! Bad and 6oss loans and advances "%%1

Apart from above quantitative loan provisioning system bank also applies qualitative
Eudgment to determine the quality of loans and advances and makes appropriate specific
provision if necessary'
Amount In Crore
A 7ross 4on -erforming Assets "A"'$!
4on -erforming Assets to 0utstanding 6oans and Advances A'&!1
B /ovement of 4onperforming Assets
0pening balance "$@'"$
Additions ";!'":
Reductions "AB'%&
Closing Balance "A"'$A
C /ovement of *pecific -rovision for 4-As
0pening Balance A"'@&
-rovisions made during the year ""'!@
Crite off %';%
Crite back of e(cess provisions %'%%
Closing Balance @$'!A
'aintenance of Re)ulatory Capital
Capital Instruments eligible for inclusion in Tier " or in <pper Tier $'
In Crore Tk'
Amount of Tier-" Capital
-aid up Capital
*tatutory Reserve
7eneral reserve
Retained 5arnings
Total of Tier -I
B Amount deducted from Tier-" Capital
7ood will
C Total amount of Tier $ capital +net of
deductions from Tier $ capital,
Total eligible capital' A$&'%"
Capital ,dequacy
A summary presentation of the bankIs approach to assessing the regulatory capital.
In Crore Tk'
A Amount of Regulatory Capital to meet unforeseen loss !BB'"A
Amount to meet Credit Risk
Amount to meet /arket Risk
Amount to meet 0perational Risk'
*ome additional capital over /CR maintained by the banksJ