Bangladesh Bank may not withdraw early warning regime from two private commercial banks because of their deteriorating financial statuses in every parameter.

The banks are Al-Arafah Islami Bank Ltd and Social Islami Bank Ltd (SIBL).

Meanwhile, BB has identified two other problem banks – ICB Islamic Bank Ltd and Bangladesh Commerce Bank Ltd. These banks failed to better their financial statuses and internal governance required to maintain market standard.

The central bank sources said, if any bank faces problems in financial operation, it is brought under early warning system and monitored very closely till the situation improves.

BB sources said the recovery status of non-performing loans by all the four banks is very poor, though these banks have substantially attained progress in some areas of respective financial operation.

The banking sector’s performance has been evaluated through CAMELS rating. The rating involves six crucial dimensions of analysis and evaluation of banking operations.

The dimensions include capital adequacy, asset quality, management soundness, earnings, liquidity, and sensitivity to market risk.

BB introduced Early Warning System of supervision from March 2005 to address the difficulties faced by the banks in any of the areas of required standards under CAMELS rating.

“The central bank’s assigned officials are closely monitoring improvement in the statuses of four banks so these banks can have good internal governance to ensure better performance,” said SK Sur Chowdhury, BB deputy governor.

He said the time of lifting early warning from the banks is yet to come, although concerned banks have improved output in some areas under the central bank’s supervision.

The managements of Al-Arafah Islami Bank and SIBL are trying to have ‘early warning regime’ lifted to show cleaning of bad image, said BB sources.

On the other hand, BB used CAMEL rating system to evaluate commercial banks analysing five indicators including capital adequacy, asset quality, management soundness, earnings, profitability and liquidity status.

The source added that BCBL and ICB Islamic Bank could not improve the capital base and asset quality as per requirement of CAMEL rating.

Five private banks earlier came out of problem bank category by improving in almost all necessary areas under CAMEL rating system, said the sources.

These banks included Pubali Bank Ltd, National Bank Ltd, United Commercial Bank Ltd, The City Bank Ltd and NCC Bank Ltd.

News: The Daily Sun/Bangladesh/15-Nov-12