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Banking sector showed rising capital strength with a weighted average core capital adequacy ratio of 10.68 percent at the end of June.

The level of capital adequacy was well above the 8.0 percent risk-weighted assets, stipulated in the Basel-II regulations.

The latest Bangladesh Bank (BB) data showed the capital requirement that banks should maintain as a regulatory obligation was Taka 63,694 crore or 10.68 percent of their total capital at the end of June this year.

The amount of the risk-weighted assets rose by 138 percent in the past five years, demonstrating a strong fundamental and low risk of the country’s banking sector, a BB official told BSS.

He said the amount of the risk-weighted assets was Taka 26,713 crore in 2009 when the central bank adopted the Base-II regulations, a global standard that banks should follow to maintain a certain level of cash reserve to fence off operational risk factors.

“The higher cash reserve reflects the higher capacity of banks to absorb shocks from operational and other losses,” the official said.

The higher capital adequacy of banks has been attributed to the prudent policy support, strict monitoring and effective training of staff of the central bank as well as commercial and specialized banks.

Cutting the time limit for classifying bad loans from six months to three months also helped a lot to bring down the amount of bad loan, which eventually strengthened the capital base.

“The banking sector also posted a stable performance in the past few years, with the non-performing loan ratio capped at a relatively low level,” the BB official said.

The banks in the first six months of this year earned gross profit of Taka 10,000 crore compared to the annual gross profit of Taka 18,000 crore in 2013.

The BB official said the profit and the capital risk-weighted assets would be more should there be no problem and credit scams in some of the state-owned banks.

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