CONSTITUENTS OF CAPITAL OF PRIVATE BANKS OF BNGLADESH. TIER-1 & TIER- 2 CAPITAL

CORE CAPITAL (TIER-1)

A. Paid up Capital

B. Non-repayable Share premium account

C. Statutory Reserve

D. General Reserve

E. Retained Earnings

F. Minority interest in Subsidiaries

G. Non-Cumulative irredeemable Preference Shares.

H. Dividend Equalisation Account

SUPPLEMENTARY CAPITAL (TIER-2)

A. General Provision maintained against Unclassified loans

B. Assets Revaluation Reserves

C. All other Preference Shares

D. Perpetual Subordinated debt

E. Exchange Equalization Account

F. Revaluation reserves of HTM Securities (Upto 50% of the revaluation reserves)

Note 1: Core Capital must be equal to or more than  5% of the risk-weighted assets.

Note 2: Reserves created by periodic revaluation of banks' assets can be included as a

Component of Tier-2 capital only if the revaluation is formally conducted by

professionally qualified valuation firm. Such reserves will be eligible up to 50% for the

treatment as Supplementary Capital provided that the rationale of the re-valued amount is

duly certified by the external auditors of the bank. Such revaluation may be done once in

a year.

Reference: BRPD Circulars on Capital Adequacy.

Cpital Adequacy / Minimum Capital Requirement of a Bank

Capital Adequacy / Minimum Capital Requirements of Banks in Bangladesh

According to the BRPD circular no. 11/2008:

Minimum Paid up Capital and Reserve & Surplus of a bank must be Tk. 400 crore of which paid up capital must be at least Tk. 200 crore.

To raise Paid-up Capital and Reserve Fund, as mentioned in the notification, banks shall

have to follow instructions as stated below:

(i) Banks shall have to fulfill the required Paid-up Capital and Reserve Fund of Taka 400 crore

within 3 years from the notification date i.e. within 11 August 2011 and the paid-up capital

will be not less than Taka 200 crore. .

(ii) To maintain required capital Banks may raise the Reserve by keeping profit after tax by

issuing right shares or IPO, if applicable.

(iii) Any Bank having shortfall of required capital and reserve will not pay or declare cash

dividend.

(iv) Foreign Banks will have to meet the capital shortfall by not repatriating the profit or by

bringing in additional/Capital from abroad within the stipulated.

(v) In terms raising the capital, bank-company shall take necessary measures to amend their

Memorandum and Articles of Association.

(vi) Feasibility of merging with other banks and financial institutions may be considered to

ensure the required capital and reserve within stipulated time limit.

Minimum Capital of bank as % of Risk-Weighted Assets:

Accoording to BRPD Master Circular No. 05/2007 on may 14, 2007.

With a view to strengthening the capital base of banks and make them prepare for the implementation of Basel II Accord, it has been decided that henceforth banks will be required to maintain Capital to Risk-Weighted Assets Ratio 10% at the minimum with core capital not less than 5%. This requirement will have to be achieved by December 31, 2007.