Bangladesh Bank on Monday barred banks from disbursing any dividend for their shareholders before September, aiming to keep the financial health of banks unhurt from the economic hit of coronavirus emergency.
Banks that have already declared dividend for 2019 will have to revise their declarations if a number of conditions attached in a central bank notice are not met, says a BB circular issued on the day.
“The objective of the directive is to strengthen the financial health of banks now under severe threat of existence under the emergency of the new virus,” a senior BB official told Dhaka Tribune.
He said the lending of banks came to a standstill as businesses now seldom seek loans from banks as manufacturing and trading activities shrank badly due to the global caronavirus pandemic.
Banks those are able to keep a minimum 12.50% capital adequacy ratio(CAR) or more without the deferral facility taken from Bangladesh Bank for 2019 to meet other expenses including provision saving, could declare as high as 30% dividend with maximum 15% in cash dividend, adds the BB notice.
It also says banks capable of keeping a minimum 12.25% CAR without the deferral facility taken from Bangladesh Bank for 2019 to meet other expenses including provision saving, will be able to declare 15% dividend with a maximum 7.50% in cash dividend.
Furthermore, banks those are able to keep a minimum 11.25% capital or more with the deferral facility taken from Bangladesh Bank for 2019 to meet other expenses including provision saving, could declare a total of 10% dividend with a maximum of 5% in cash dividend.
Banks those are able to keep a minimum 10% CAR with the deferral facility taken from Bangladesh Bank for 2019 to meet other expenses including provision saving, may declare a total of 5% stock dividend, it says further.
The instruction has been given under the power of section 45 of the Banking Companies ACT 1991 (as amended till 2018).
According to Bangladesh Bank guidelines on risk-based capital adequacy, banks have to maintain a minimum capital adequacy ratio (CAR)— which is a bank’s capital reserve to cover their risk exposure — of 12.50% by 2019, in line with the BASEL III requirement.
At the end of December last year, 12 banks faced capital shortfall to Tk23,612.43 crore, as per central bank data.
