Sonali Bank Case Study

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Executive Summary In the recent years one of the most vital issues for all the banking companies has been raising and maintaining adequate capital in accordance with the framework of capital adequacy as prescribed under Basel - II accord. Now it is the crucial issue for the banking companies to keep up minimum capital for covering some unpredictable risks arises from the bank’s wide range of operations and diverse portfolio management. The banks are required to meet adequate capital requirements because of capital plays significant role in supporting the daily operations and ensuring the long-term viability of the bank. Capital provides a cushion against the risk of failure by absorbing financial and operating losses until management of the…show more content…
Sonali Bank is not much more efficient, organized and regulated to the Bangladesh Bank guidelines to have the minimum capital for all the creditors the bank has. Capital promotes and ensures public confidence in a bank and reassures to its creditors/depositors of its profitability and financial strength. So, it should try to be strong enough to reassure borrowers about the ability of the bank to meet their needs. Capital supplies funds for the bank's growth and new projects or development of new services/facilities as well as serving as a governing body. It puts limitation on the extent of risk that a bank can accept or bear. It protects the deposit insurance system from serious…show more content…
Many commercial banks are operating in Bangladesh and playing significant role in the economic progress through mobilization of funds from savings units to deficit units; SBL is one of them. To supervise every bank’s management performance Bangladesh Bank regulates performance measurement rating like CAMELS rating as standard rating system. Every commercial banks of Bangladesh should follow the guidelines of Bangladesh Bank for ensuring secure banking business. Bangladesh Bank has introduced new guidelines and advices for Minimum Capital Requirement (MCR) for every bank operating in the country. The new MCR is 10% on calculating of the Total Risk Weighted Assets (RWA). If banks hold more capital, they can more easily confront the unforeseeable risks and more likely to control the market share. Capital adequacy measurement under the Bangladesh Bank guideline is needed for banks to safeguard their banking business for longer term growth with the shorter term survival. Capital adequacy requirement or threshold for banks has been raised from 9% to 10% of the total risk weighted assets and core capital requirement should also be raised from 4.5% to 5% in the recent year (BRPD Circular No. 10 of BB). In the recent years SBL has maintained the sufficient CAR as guided by the Bangladesh Bank; though it failed to keep prerequisite ratio in some years. This entire paper is based on the theoretical

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