Default by top three borrowers to to hit banks

Resilience in the banking sector will be affected significantly if the top three borrowers default on their loans, as per the financial stability assessment report of the Bangladesh Bank.

The report, formed on stress tests based on the January-March quarter this year, said that a 3-percent increase in non-performing loans (NPLs) or a default of the three largest borrowers is likely to affect the banking sector's resilience significantly.

The capital to risk weighted asset ratio (CRAR) of the banking sector will fall below the minimum regulatory requirement if the top three borrowers default, it said.

The report said that among broader risk factors, credit risk remained the major risk factor for the banking sector in terms of its impact on capital adequacy.

During January to March of this year, the CRAR of the banking sector stood at 11.23 percent, which was 60 basis points lower than that of the previous quarter, as per the report.

BB has established an export-oriented pre-financing fund to protect the export sector from prevailing adverse global economic conditions, said the report.

It added that it has also taken measures to ensure timely realisation of export proceeds by allowing banks to make payments to exporters after applying the exchange rate prevailing at the date, pre-fixed as per regulation.