RBCA

IMPLEMENTATION OF BASEL III IN BANGLADESH. REF: BRPD CIRCULAR NO. 18 DATED 21.12.2014.

RBCA Guidelines

  1. COMPONENTS OF CAPITAL. REF: BRPD CIRCULAR NO. 04 DATED 23.02.2014.

For the purpose of calculating capital under capital adequacy framework, the capital of banks shall be classified into two tiers. The total regulatory capital will consist of sum of the following categories:

  1. Tier 1 Capital (going-concern capital)
    1. Common Equity Tier 1
    2. Additional Tier 1
  2. Tier 2 Capital (gone-concern capital).

 Common Equity Tier 1 Capital: For the local banks, Common Equity Tier 1 (CET1) capital shall consist of sum of the following items:

  1. Paid up capital
  2. Non-repayable share premium account
  3. Statutory reserve
  4. General reserve
  5. Retained earnings
  6. Dividend equalization reserve
  7. Minority interest in subsidiaries

Less: Regulatory adjustments applicable on CET1 as mentioned in paragraph 3.4.

Note:

GOING-CONCERN CAPITAL: From regulatory capital perspective, going-concern capital is the capital which can absorb losses without triggering bankruptcy of the bank.

GONE-CONCERN CAPITAL is the capital which will absorb losses only in a situation of liquidation of the bank.

MINORITY INTEREST (in case of CRAR calculated on a consolidated basis) i.e. common shares issued by consolidated subsidiaries of the bank and held by third parties meeting eligibility criteria, as mentioned in Annex 2.

 Additional Tier 1 Capital: For the local banks, Additional Tier 1 (AT1) capital shall consist of the following items:

  1. Instruments issued by the banks that meet the qualifying criteria for AT1 as specified at Annex 4
  2. Minority Interest i.e. AT1 issued by consolidated subsidiaries to third parties (for consolidated reporting only); Refer to Annex 2 for further details

Less: Regulatory adjustments applicable on AT1 Capital as mentioned in paragraph 3.4.

Tier 2 Capital: Tier 2 capital, also called ‘gone-concern capital’, represents other elements which fall short of some of the characteristics of the core capital but contribute to the overall strength of a bank.  For the local banks, Tier 2 capital shall consist of the following items:

  1. General Provisions
  2. Subordinated debt / Instruments issued by the banks that meet the qualifying criteria for Tier 2 capital as specified at Annex 4
  3. Minority Interest i.e. Tier 2 issued by consolidated subsidiaries to third parties as specified at Annex 2

Less: Regulatory adjustments applicable on Tier 2 capital as mentioned at paragraph 3.4

.