Bangladesh Bank has taken an initiative to improve banks' financial health by increasing their capital adequacy ratio (CAR) in line with Basel III standards.

Basel III is a comprehensive set of reform measures, developed by the Basel Committee on Banking Supervision, to strengthen regulation and supervision and reduce risks of the banking sector globally.

To start the process in Bangladesh, central bank officials yesterday sat with the board of Sonali Bank, which has a huge capital deficit.

BB General Manager SM Rabiul Hassan, Deputy General Manager Ibrahim Bhuiyan and Joint Director Shabari Islam were present at the meeting at the head office of Sonali Bank.

A BB team will hold meetings with other banks that have capital shortfall.

As on June 30, 2015, the CAR of Sonali was 2.44 percent of its risk weighted assets, much lower than the required minimum ratio of 10 percent, according to the central bank. In December 2014, the bank's CAR was 7.37 percent, which fell to 5.26 percent in March.

BB has calculated the ratio by taking the value of Sonali's goodwill into consideration, said Pradip Kumar Dutta, managing director of the bank.

When Sonali was corporatised in 2007, its goodwill value was estimated at Tk 6,574 crore with a condition of monetising the total amount in 10 years. In 2014, the goodwill value of the bank stood at Tk 1,972 crore.

In June this year, as per Sonali's calculation, the bank's CAR was 7.25 percent, Dutta said.

He said they have sent a letter to the BB in this regard and the next steps would be taken based on the decision of the central bank. Dutta said his bank has taken a number of steps and he hopes their capital will increase further by December.

A high official of the central bank said their next meeting will be with Janata Bank.

At present, the banks maintain CAR as per Basel II standards. Last year, the central bank decided to implement the Basel III framework and conducted a quantitative impact study.

On the basis of the study, they also sent a roadmap to the banks on how they would implement the framework.

In December 2014, the average capital adequacy ratio of banks in Bangladesh was 11.4 percent, while it was 16.9 percent in Sri Lanka, 17.1 percent in Pakistan and 12.8 percent in India.