Bangladesh Development Bank Limited (BDBL) Disclosures on Risk Based Capital (Basel II) Based on 31 December 2 1 These disclosures

have been made in accordance with the Bangladesh Bank BRPD Circular no. 35 of 2 December 2!"! as to #uidelines on $Risk Based Ca%ital &de'uac( for Banks$ Revised Regulator( )ramework in line with Basel **. 1! Capital "de#uac$ under Basel%II To co%e with the international best %ractices and to make the Bank+s ca%ital more risk sensitive as well as more shock resilient, -#uidelines on Risk Based Ca%ital &de'uac( .RBC&/ for Banks .Revised regulator( ca%ital framework in line with Basel **/ have been introduced from 0anuar( !", 2!! . Throughout the (ear 2!! , Basel ** re%orting was %arallel to Basel * which was the statutor( re'uirement u%1to that (ear. 2owever, beginning (ear 2!"!, Basel ** became mandator(. Bangladesh Bank further reviewed the RBC& #uidelines on several occasions %rior to Basel ** became full( in force. *nstructions regarding 3inimum Ca%ital Re'uirement .3CR/, &de'uate Ca%ital, and Disclosure re'uirements as stated in these guidelines have to be followed b( all scheduled banks for the %ur%ose of statutor( com%liance. &bove guidelines were issued b( Bangladesh Bank .BB/ under section "3 and section 45 of Bank Com%an( &ct, " " and also in accordance with 5*nternational Convergence of Ca%ital 3easurement and Ca%ital 6tandards7 & Revised )ramework8 of 0une, 2!!9 .Po%ularl( known as :Basel ** Ca%ital &de'uac( )ramework/ released b( Basel Committee on Banking 6u%ervision .BCB6/. Basel ** guidelines are structured on the following as%ects7 a/ 3inimum ca%ital re'uirements to be maintained b( a Bank against credit, market, and o%erational risks. b/ Process for assessing the overall ca%ital ade'uac( aligned with risk %rofile of a Bank as well as ca%ital growth %lan. c/ )ramework of %ublic disclosure on the %osition of a Banks risk %rofiles, ca%ital ade'uac(, and risk management s(stem. 2 &cope o' application Basel ** guidelines a%%l( to all scheduled banks on -6olo basis as well as on -Consolidated basis where1 1 6olo Basis refers to all %osition of the bank and its local and overseas branches;offices< and 1 Consolidated Basis refers to all %osition of the bank .including its local and overseas branches;offices/ and its subsidiar( com%an(.ies/ engaged in financial .e=cluding insurance/ activities like merchant banks, brokerage firms, discount houses, etc .if an(/. Bangladesh Development Bank Limited followed the scope narrated above. Bank has Tier 1 and Tier 2 capital structure at the moment. 3 Capital base Regulator( ca%ital has been categori>ed into three tiers7 Tier ", Tier 2, and Tier 3 res%ectivel(. a) (ier 1 capital Tier " ca%ital called )Core Capital* com%rises of highest 'ualit( of ca%ital elements that consists of7 i/ ii/ Paid u% ca%ital ?on1re%a(able share %remium account

iii/ 6tatutor( reserve iv/ #eneral reserve v/ Retained earnings vi/ 3inorit( interest in subsidiaries vii/ ?on1cumulative irredeemable %reference shares viii/ Dividend e'uali>ation account BDBL's Core Capital comprises of the above elements e cept for ! ?on1re%a(able share %remium account @3inorit( interest in subsidiaries "on# cumulative irredeemable preference shares' and 'Dividend $%uisilation &ccount'.

b)

(ier 2 capital Tier 2 ca%ital called -6u%%lementar( Ca%ital re%resents other elements which fall short of some of the characteristics of the core ca%ital but contribute to the overall strength of a bank and consists of7 i/ ii/ iii/ v/ vi/ vii/ #eneral %rovision &sset Revaluation reserves u% to 5!A Revaluation Reserve for 6ecurities u% to 5!A Revaluation reserve for e'uit( instrument u% to "!A &ll other %reference shares 6ubordinated debt

c)

Bank's Tier 2 capital comprises of #eneral %rovision and &sset Revaluation reserves (ier 3 capital Tier 3 ca%ital called -&dditional 6u%%lementar( Ca%ital, consists of short1term subordinated debt .original maturit( less than or e'ual to five (ears but greater than or e'ual to two (ears/ would be solel( for the %ur%ose of meeting a %ro%ortion of the ca%ital re'uirements for market risk. BDBL has no Tier ' capital as mentioned earlier.

+!

Conditions 'or maintaining regulator$ capital The calculation of Tier " ca%ital, Tier 2 ca%ital, and Tier 3 ca%ital is subBect to the following conditions7 a/ The amount of Tier 2 ca%ital will be limited to "!!A of the amount of Tier

" ca%ital. b/ 5!A of revaluation reserves for fi=ed assets and securities eligible for Tier

2 ca%ital. c/ "!A of revaluation reserves for e'uit( instruments eligible for Tier 2

ca%ital. d/ 6ubordinated debt shall be limited to a ma=imum of 3!A of the amount of Tier " ca%ital. e/ Cimitation of Tier 37 & minimum of about 2D.5A of market risk needs to be su%%orted b( Tier " ca%ital. 6u%%orting of 3arket Risk from Tier 3 ca%ital shall be limited u% to ma=imum of 25!A of a banks Tier " ca%ital that is available after meeting credit risk ca%ital re'uirement.

BDBL has complied with the conditions as embodied in this respect wherever applicable. ,! -ligible regulator$ capital *n order to obtain the eligible regulator( ca%ital for the %ur%ose of calculating Ca%ital &de'uac( Ratio .C&R/, banks are re'uired to make following deductions from their Tier1" ca%ital7 a/ *ntangible asset e.g., book value of goodwill and value of an( contingent assets, etc. which are 6hortfall in %rovisions re'uired against classified assets

shown as assets b/ c/

6hortfall in %rovisions re'uired against investment in shares

d/ Remaining deficit on account of revaluation of investments in securities after netting off from an( other sur%lus on the securities. e/ Reci%rocal;crossholdings of banks ca%ital;subordinated debt artificiall( intended to inflate the ca%ital %osition of banks f/ 2olding of e'uit( shares in an( form e=ceeding the a%%roved limit under section 29.2/ of Bank Com%an(

&ct, " ". The additional;unauthori>ed amount of holdings will be deducted at 5!A from Tier " ca%ital and 5!A from Tier 2 ca%ital. g/ *nvestments in subsidiaries which are not consolidated. The normal %ractice is to consolidate subsidiaries for the %ur%ose of assessing the ca%ital ade'uac( of banking grou%s. Ehere this is not done, deduction is essential to %revent the multi%le uses of the same ca%ital resources in different %arts of the grou%. The deduction for such

investments will be 5!A from Tier " ca%ital and 5!A from Tier 2 ca%ital. The assets re%resenting the investments in subsidiar( com%anies whose ca%ital had been deducted from that of the %arent would not be included in total assets for the %ur%oses of com%uting the C&R
Fligible Tier 2 ca%ital will be derived after deducting com%onents .if an(/ 'ualified for deduction. Total eligible regulator( ca%ital will be calculated b( summing u% the eligible Tier ", Tier 2 and Tier 3 ca%ital. .! Calculation o' Capital "de#uac$ Ratio *n order to calculate C&R, banks are re'uired to calculate their Risk Eeighted &ssets .RE&/ on the basis of credit, market, and o%erational risks. Total RE& will be determined b( multi%l(ing the amount of ca%ital charge for market risk and o%erational risk b( the reci%rocal of the minimum C&R and adding the resulting figures to the sum of risk weighted assets for credit risk. The C&R is then calculated b( taking eligible regulator( ca%ital as numerator and total RE& as denominator. Bank followed the given guidelines in proper terms.
/!

0inimum capital re#uirements a/ ?o 6cheduled Bank in Bangladesh shall commence and carr( on its business unless it has the minimum re'uired ca%ital fi=ed b( BB from time to time as %er section "3 of Bank Com%an( &ct, " ". b/ Banks have to maintain minimum C&R on -6olo basis as well as on -Consolidated basis as %er instruction.s/ given b( BB from time to time. Bank has been able to maintain re%uired C&(. Banks presents C & ( i s 2 ) . * ) + , Tier - Capital ratio is 1../'+ and Tier 2 Capital ratio is 12.1.+ c/ Banks have to maintain at least 5!A of re'uired ca%ital as Tier " ca%ital Credit Risk Bank followed the suggested methodolog0, process as contained in the 1uidelines. Credit risk is the %otential that a bank borrower or counter%art( fails to meet its obligation in accordance with agreed term. b) 0ethodolog$ Bangladesh Bank ado%ted 6tandardi>ed &%%roach for calculating Risk Eeighted &ssets. The ca%ital re'uirement for credit risk is based on the risk assessment made b( e=ternal credit assessment institutions .FC&*s/ recogni>ed b( BB for ca%ital ade'uac( %ur%oses. Banks are re'uired to assign a risk weight to all their on1balance sheet and off1balance sheet e=%osures. Risk weights are based on e=ternal credit rating .solicited/ which was ma%%ed with the BB rating grade or a fi=ed weight that is s%ecified b( Bangladesh Bank.

a)

2!

a) 0arket Risk

Bank followed the suggested methodolog0, process as contained in the 1uidelines. 3arket risk is defined as the risk of losses in on and off1balance sheet %ositions arising from movements in market %rices. The market risk %ositions subBect to this re'uirement are7

i/

ii/

The risks %ertaining to interest

rate related instruments and e'uities in the trading book< and )oreign e=change risk and commodit( risk throughout the bank .both in the banking book and in the trading book/.

b) 0ethodolog$ *n 6tandardi>ed &%%roach, the ca%ital re'uirement for various market risks .interest rate risk, e'uit( %rice risk, commodit( %rice risk, and foreign e=change risk/ is determined se%aratel(. The total ca%ital re'uirement in res%ect of market risk is the sum of ca%ital re'uirement calculated for each of these market risk sub1categories. The methodolog( to calculate ca%ital re'uirement under 6tandardi>ed &%%roach for each of these market risk categories is as follows7 a/ Ca%ital Charge for *nterest Rate Risk G Ca%ital Charge for 6%ecific Risk H Ca%ital Charge for #eneral 3arket Risk. b/ Ca%ital Charge for F'uit( Position Risk G Ca%ital Charge for 6%ecific Risk H Ca%ital Charge for #eneral 3arket Risk. c/ Ca%ital Charge for )oreign F=change Risk G Ca%ital Charge for #eneral 3arket Risk
1 ! a) 3perational Risk

Bank followed the suggested methodolog(, %rocess as contained in the #uidelines. I%erational Risk is defined as the risk of losses resulting from inade'uate or failed internal %rocesses, %eo%le and s(stems or from e=ternal events. This definition includes legal risk, but e=cludes strategic and re%utation risk, risk arising from staff inefficienc(, risk arising from inade'uac( in using *CT in full range. b) 0easurement 0ethodolog$ Banks o%erating in Bangladesh shall com%ute the ca%ital re'uirements for o%erational risk under the Basic *ndicator. &%%roach .B*&/. Jnder B*&, the ca%ital charge for o%erational risk is a fi=ed %ercentage, denoted b( .al%ha/, of average %ositive annual gross income of the bank over the %ast three (ears. )igures for an( (ear in which annual gross income is negative or >ero, should be e=cluded from both the numerator and denominator when calculating the average.

11

Disclosure under 4illar III Disclosures are given below as s%ecified b( RBC& #uideline, December 2!"!.

")

&cope o' "pplication 5ualitative Disclosure

.a/ The name of the cor%orate

entit( to which this guidelines a%%lies .b/ & brief descri%tion of the entit(

B&?#C&DF62 DFKFCIP3F?T B&?L C*3*TFD

Fstablishment7 Bangladesh Develo%ment Bank Cimited .BDBC on the Bank/ was incor%orated under the Com%anies &ct, " 4 on "9 ?ovember 2!! to ac'uire and take1over, as going concern, the undertakings and businesses of statutor( bodies of Bangladesh 6hil%a Bank .B6B/ and Bangladesh 6hil%a Rin 6angstha .B6R6/ constituted res%ectivel( under the Bangladesh 6hil%a Bank Irder, " M2 .President Irder ?o."2 of " M2/ and Bangladesh 6hil%a Rin 6angstha Irder, " M2 .President Irder ?o."2D of " M2/ with all of their assets, benefits, rights, %owers, authorities, %rivileges, liabilities, borrowings and obligations and to carr( on with the same business. Two vendors agreement was e=ecuted between the #overnment of the %eo%les Re%ublic of Bangladesh and Bangladesh Develo%ment Bank Cimited on 3" December 2!! in this regard. The registered office of the Bank is located at D RaBuk &venue, 3otiBheel, Dhaka1"!!! Princi%al activities7 Bangladesh Develo%ment Bank Cimited e=tends financial assistance both in local and foreign currencies for setting u% new industries and %rovides all kinds of commercial banking services to its customer through its branches in Bangladesh. The BDBC inherited membershi% of Dhaka 6tock F=change Cimited and Chittagong 6tock F=change Cimited, acts as stock dealer and o%erate two brokerage houses. The BDBC is now managing a close1end 3utual )und with %aid u% ca%ital of Tk. 5.!! crore. ?ot &%%licable

.c/ &n( restrictions, or other maBor im%ediments, on transfer of funds or regulator( ca%ital wihtin the grou% 5uantitative Disclosure .d/ The aggregate amount of ca%ital deficiencies in all subsidiaries not included in the consolidation that are deducted and the names of such subsidiaries

?ot &%%licable

B)

Capital &tructure

5ualitative Disclosure

a/ 6ummar( information on the t he terms and conditions of the main features of all ca%ital instruments, s%eciall( in the case of ca%ital instruments eligible for inclusion in Tier " or Tier 2.

The terms and conditions of the main features of all ca%ital instruments have been segregated in line with the eligibilit( criteria set forth vide BRPD Circular ?o. 35 dated 2 December 2!"! and other relevant instructions given b( Bangladesh Bank from time to time. The main features of the ca%ital instruments are as follows7

(ier 1 capital instruments 4aid%up share capital6 *ssued, subscribed and full( %aid u% share ca%ital of the Bank. *t

re%resents Paid u% Ca%ital, Right 6hares as well as Bonus 6hares issued from time to time. &tatutor$ Reserve6 &s %er 6ection 24."/ of the Bank Com%anies &ct, " ", an amount e'uivalent to 2!A of the profit before taxes for each year of the Bank has been transferred to the
Statutory Reserve Fund.

Bank is complied in this respect. 7eneral reserve6 &n( reserve created through Profit and Coss &%%ro%riation &ccount for fulfilling an( %ur%ose.

Bank is complied in this respect. Retained -arnings6 &mount of %rofit retained with the banking com%an( after meeting u% all e=%enses, %rovisions and a%%ro%riations. Bank is complied in this respect. (ier 2 capital instruments #eneral %rovision maintained against unclassified loans and off1balance sheet e=%osures7 &s %er BB directive, amount of %rovision maintained against unclassified loans and off1balance sheet e=%osures as of the re%orting date has been considered. "sset revaluation reserve6 5!A of &ssets Revaluation Reserve is considered as Tier

2 Ca%ital. The revaluation reserve was formall( conducted b( the Professionall( Nualified C h a r t e r e d a c c o u n t a n t s firm and dul( certified b( the statutor( auditor of the Bank.
.

5uantitative Disclosure

&mount in @!!!+ Tk .

.b/

The amount of Tier " Ca%ital, with se%arate disclosure of7 .as of 3"."2.2!"!/.

.c/ Tier 2 ca%ital

O Paid u% Ca%ital O ?on1 re%a(able share %remium account O 6tatutor( reserve O #eneral reserve O Retained earnings O 3inorit( *nterest in 6ubsidiaries O ?on1 cumulative irredeemable %reference shares O #eneral Reserve O &sset Revaluation Reserve

4!!!,!!! 1 ",!45,D!! 5!,!!! 39,M!! 1 9,!32,5!! 2 M, !! 4,3!2,"!! 4,9!!,!!! "!,932,5!! 1 1 8.328,

.d /

Total amount of Tier ** P Tier *** Ca%ital .e/ Ither deduction from Ca%ital (') (otal eligible capital
C) Capital "de#uac$

5ualitative Disclosure .a/ & summar( discussion of the Bank$s a%%roach to assessing the ade'uac( of its ca%ital to su%%ort current and future activities. Ca%ital &de'uac( is the cushion re'uired to be maintained for covering the Credit risk, 3arket risk and I%erational risk so as to %rotect the de%ositors and general creditors interest against such losses. *n line with BRPD Circular ?o. 35 dated 2 December, 2!"!, the Bank has ado%ted 6tandardi>ed &%%roach for Credit Risk, 6tandardi>ed .Rule Based/ &%%roach for 3arket Risk and Basic *ndicator &%%roach for I%erational Risk for com%uting Ca%ital &de'uac(.

5uantitative Disclosure

&mount in @!!!+Taka

.b/

Ca%ital re'uirement for Credit Risk7 .C/ Ca%ital re'uirement for 3arket Risk7 .d/ Ca%ital re'uirement for I%erational Risk7 (e) (otal Re#uired Capital .f/ Total Risk Eeighted &sset

",D9!,M9D ",3"3,"!! 233,5!! 38+ /83.1 3M,D9!,!!! 2D.!DA "5. 3A "2."5A

.g/ Ca%ital &de'uac( Ratio .h/ Core Ca%ital .Tier "/ to Risk Eeighted &sset .i/ / 6u%%lementar( Ca%ital .Tier 2/ to Risk Eeighted &sset

D)

Credit Risk

5ualitative Disclosure .a/

The general 'ualitative disclosure re'uirement with res%ect to credit risk, including7 Bank classifies loans and advances into %erforming and non1%erforming loans .?PC/ in accordance with the Bangladesh Bank guidelines in this res%ect. &n ?P& .im%aired! is defined as a loan or an advance where interest and; or installment of %rinci%al remain overdue for more than ! da(s in res%ect of a Continuous credit, Demand loan or a Term Coan etc. Classified loan is categori>ed under following !3 .three/ categories7 O 6ub1 sandard O D oubtful O Bad P Coss &n( continuous loan will be classified as7 O 6ub1standard$ if it is %ast due;over due for 9 months or be(ond but less than months. O RDoubtful$ if it is %ast due;over due for months or be(ond but less than "2 months. O -Bad;Coss$ if it is %ast due;over due for "2 months or be(ond. &n( Demand Loan will be classified as7 O 6ub1standard$ if it remains %ast due;overdue for 9 months or be(ond but not over months from the date of claim b( the bank or from the date of creation of forced loan. O Doubtful$ if it remains %ast due;overdue for months or be(ond but not over "2 months from the date of claim b( the bank or from the date of creation of forced loan. O Bad;Coss$ if it remains %ast due;overdue for "2 months or be(ond from the date of claim b( the bank or from the date of creation of forced loan. *n case of an( installment.s/ or %art of installment.s/ of a 9i:ed (erm Loan is not re%aid within the due date, the amount of un%aid installment.s/ will be termed as :defaulted installment$. i. *n case of )i=ed Term Coans, which are re%a(able ;ithin ma:imum 'ive $ears of time7

Q Definitions of %ast due and im%aired .for accounting % ur%oses/

O *f the amount of $defaulted installment$ is e'ual to or more than the amount of installment.s/ due within 9 .si=/ months, the entire loan will be classified as $$6ub1standard$$. O *f the amount of $defaulted installment$ is e'ual to or more than the amount of installment.s/ due within "2 .twelve/ months, the entire loan will be classified as $$DoubtfulR. O *f the amount of $defaulted installment$ is e'ual to or more than the amount of installment.s/ due within "D .eighteen/ months, the entire loan will be classified as $$Bad;Coss$$. ii. *n case of )i=ed Term Coans, which are re%a(able in more than 'ive $ears of time7 O *f the amount of $defaulted installment$ is e'ual to or more than the amount of installment.s/ due within "2 .twelve/ months, the entire loan will be classified as $$6ub1standard$$. O *f the amount of $defaulted installment$ is e'ual to or more than the amount of installment.s/ Q Descri%tion of a%%roaches due within followed for s%ecific and general "D .eighteen/ months, the entire loan will be classified as $$DoubtfulR. allowances and statistical methods O *f the amount of $defaulted installment$ is e'ual to or more than the amount of installment.s/ due within 24 .twent( four/ months, the entire loan will be classified as $$Bad;Coss$$. T(%es of loans and advances 2ouse building and Consumer %rofessional Ither than 2ousing )inance P Professionals to setu% business Provision for loan against shares 6hort term &gri. Credit and 3icro Credit 6mall P 3edium Fnter%rise )inance Ithers Provision JC 2A 5A 2A 5A "A "A 63& 5A 5A 5A 5A 5A 5A 66 2!A 2!A 2!A 5A 2!A 2!A D) 5!A 5!A 5!A 5A 5!A 5!A BC "!!A "!!A "!!A "!!A "!!A "!!A

Q Discussion of the Bank$s credit Credit risk is the risk that the counter%art( to a financial institution fails to meet its obligation and cause to incur a financial loss. Concentration of credit risk arises when a number of counter risk management %olic( %arties are engaged in similar business activities or activities in the same geogra%hical region or have similar economic features that would cause their abilit( to meet contractual obligations to be similarl( affected b( changes in economic, %olitical or other conditions. Credit risk in the Bank$s Portfolio is monitored, reviewed and anal(>ed b( the Credit Risk 3anagement De%artment .CR3D/. CR3D determines the 'ualit( of the credit %ortfolio and assists in minimi>ing %otential losses.

5uantities Disclosure

.b/

Total gross credit risk Cash Credit e=%osures broken down b( Long (erm Loan maBor t(%es of credit 3ver Dra't Bridge Loan e=%osure Consumer Loan Loan <nder Investors &cheme &ta'' Loan

5 M,455 M,2D5,3"! ",D " MD,!5D !, 5M 2,424 ",D5!,29M

282 .8 2

.C/

#eogra%hical distribution of Division ;ise Loans and "dvances6 e=%osures, broken down in Dhaka Division significant areas b( maBor Lhulna Division Chittagong Division t(%es of credit e=%osure RaBshahi Division Barishal Division 6(lhet Division Rong%ur Division

,45!,5D4 "2 ,45! 4," 4 D,9"D 49,23 "M,9" 9 ,2 D 282 .8 2 9"3,DD3 2M9,!"D 5,D"3,D!9 "3","4D D",D9D "9MMM 1 "2 ,9 M 49,!2M ",2!D 45!,M94 53,"52 ",D ,9"M 2,! ", 9M 282 .8 2 4,9 ,DD3 254,"5! ""!,M4! " , M 2, M!, 95 ",D5!,29M
282 .8 2

.D/

6ector wise &dvances

Coans

andIndustrial &ector )ood P &llied Products 0ute P &llied )ibre Products Cotton, Eollen P 6(nthetic Te=tile Pa%er, Pa%er Products P Printing Tanner( P its Products ?on1metallic mineral Products Basic 3etal Products 3etal Products Flectrical 3achiner( P #oods 3achiner( P 6%are Parts Trans%ort Chemicals P Pharmaceuticals Petro1 Chemicals 6ervice *ndustries 3iscellaneous

.)/ Classification 6tatus of Coans Classi'ication &tatus6 6tandard and &dvances 6%ecial 3entioned &ccounts 6ub1standard Doubtful Bad;Coss 6taff loan

&mount in @!!!+Taka

.#/ Residual contractual Re%a(able S on demand maturit( breakdown of S u%to 3 months the whole S over 3 months but below " (ear %ortfolio, broken down b( S over " (ear but below 5 (ears maBor t(%es of credit S over 5 (ears e=%osure. .2/ Probition &gainst Coans P &dvances 4rovision 'or <n%Classi'ied Loan Provision held at the beginning of the (ear )ull( %rovided debts written off .1/ Recoveries of amount Previousl( Eritten off .H/ 6%ecific %rovision for the (ear .H/ F=cess %rovision transferred to %rovision for C* Coan .1/ 6%ecific Provision )or 6%ecial 3entioned 4rovision held at the end o' the $ear 4rovision 'or Classi'ied Loan Provision held at the beginning of the (ear )ull( %rovided debts written off .1/ Recoveries of amount Previousl( Eritten off .H/ 6%ecific %rovision for the (ear .H/ Recoveries P %rovision no longer re'uired .1/ F=cess %rovision transferred to %rovision from J? classified loan 4rovision held at the end o' the $ear
-) -#uities6 Disclosures 'or Banking Book 4ositions Nualitative Disclosure

393, !! 3 9,"!! 53, !! 4,M9 ,5!! 3,422,9!2 282 .8 2

2 M, !4 1 1 1 1

",344,M3M " ",294 " ",294 2,4!! M ,"42 "2!,"M3 1831181.1

.a/

The general 'ualitative disclosure re'uirement with res%ect to the e'uit( risk, including 7 differentiation between holdings on which ca%ital gains are e=%ected and those taken under other obBectives including for relationshi% and strategic reasons< and Discussion of im%ortant %olicies covering the valuation and accounting of e'uit( holdings in the banking book. This includes the accounting techni'ues and valuation methodologies used, including ke( assum%tions and %ractices affecting valuation as well as significant changes in these %ractices. *nvestment in e'uit( is mainl( for investment and strategic %ur%ose.

Nuoted shares are valued at cost. ?ecessar( %rovision is maintained if market %rice falls below the cost %rice. Jn'uoted shares are valued at cost.

5uantitative Disclosure

b/ .b/ Kalue disclosed in the balance sheet of investment, as well as the fair value of those investments< for 'uoted securities, a com%arison to %ublicl( 'uoted share values where the share %rice is materiall( different from fair value. .C/ The cumulative reali>ed gains .losses/ arising from sales and li'uidations i n the re%orting %eriod. .d/ Q Total unreali>ed gains .losses/ Q Total latent revaluation gains .losses/ Q &n( amounts of the above included in Tier 2 ca%ital .e/ Ca%ital re'uirements broken down b( a%%ro%riate e'uit( grou%ing, consistent with the bank$s methodolog(, as well as the aggregate amounts and the t(%e of e'uit( investments subBect to an( su%ervisor( %rovisions regarding regulator( ca%ital re'uirements

?ot a%%licable

9M5,3"M 32,9MD,22" ?il ?il ?il

7) 0arket Risk 5ualitative Disclosure

.a/ Kiews of BID on trading; investment activities .b/ 3ethods used to measure 3arket risk

The Board a%%roves all %olicies related to market risk, sets limits and reviews com%liance on a regular basis. The obBective is to %rovide cost effective funding last (ear to finance asset growth and trade related transaction. 6tandardi>ed a%%roach has been used to measure the market risk. The total ca%ital re'uirement in res%ect of market risk is the aggregate ca%ital re'uirement calculated for each of the risk sub1categories. )or each risk categor( minimum ca%ital re'uirement is measured in terms of two se%aratel( calculated ca%ital charges for $s%ecific risk$ and $general market risk$. The C e n t r a l & c c o u n t s D e % a r t m e n t manage market risk covering li'uidit(, interest rate and foreign e=change risks with oversight from &sset1Ciabilit( 3 anagement Committee.&CCI/ com%rising senior e=ecutives of the Bank. &CCI is chaired b( the 3anaging Director. &CCI meets at least once in a month. for There are a%%roved %olic( for 3arket risk related instruments both on1balance sheet and off1balance sheet items. The investments are monitored and enforced on a regular basis to %rotect against market risks. Prevailing market condition, e=change rate, fore= %osition and transactions a r e r e v i e w e d t i m e t o t i m e to mitigate market risks.

.c/ 3arket risk 3anagement s(stem

.d/

Policies and %rocess mitigating market risk

&mount in @!!!+Taka 5uantitative Disclosure .b/ The ca%ital re'uirements for7 *nterest rate risk F'uit( %osition risk )oreign e=change risk Commodit( risk

32,2!! ",3"",!!! 3,!!! 1 13+.82

=) 3perational Risk 5ualitative Disclosure

.a/ O Kiews of BID on s(stem to reduce I%erational Risk

The %olic( for o%erational risks including internal control P com%liance risk is a%%roaved b( the board taking into account relevant guidelines of Bangladesh bank. &udit committee of the Borad oversees the activities of *nternal Control P Com%liance Division .*CCD/ to %rotect against all o%erational risk. B D B C has a %olic( to %rovide com%etitive %ackage and best working environment to attract and retain the most talented %eo%le available in the industr(. &B$s strong brand image %la(s an im%ortant role in em%lo(ee motivation. &s a result, there is no significant %erformance ga%. ?o %otential e=ternal events is e=%ected to e=%ose the Bank to significant o%erational risk. The %olic( for o%erational risks including internal control P com%liance risk is a%%roved b( the Board taking into account relevant guidelines of Bangladesh bank. Polic( guidelines on *nternal &udit s(stem is in o%eration. Branches are audited regularl( b( *nternal Control P Com%liance Division .*CCD/. *t is the %olic( of the bank to %ut all the branches of the bank under an( form of audit at least once in a (ear. *CCD directl( re%ort to &udit Committee of the Board. Bank$s &nti1 3one( laundering activities are headed b( C&3FCCI and their activities are devoted to %rotect against all mone( laundering and terrorist finance related activities. &%art from that, there is ade'uate chesk P balance at ever( stage of o%eration, authorities are %ro%erl( segregated and there is at least dual control on ever( transaction to %rotect against o%erational risk. Basic *ndicator &%%roach was used for calculating ca%ital charge for o%erational risk as of the re%orting date.

OPerformance ga% of e=ecutives and staffs

OPotential e=ternal events OPolicies and %rocesses for mitigating o%erational risk

O &%%roach for calculating ca%ital charge for o%erational risk

5uantitative d isclosure .b/ The ca%ital re'uirements for I%erational Risk

&mount in @!!!+Taka 233,5!!