Assignmenton

RequiredlevelofT1capitalratiocalculationandMinimumTotal
CapitalRatioofEBLinaccordanceofBBGuideline2014

Submitted to:
Md. Lutfor Rahman
First Assistant Vice President, UCBL
Course Teacher of International Banking & Financial Regulation
Course No FNB 507

Submitted by:
Lamia Nuzhat Shashi (Student ID - 422)
Mohsi Nihad Mosabbir Ornab (Student ID 439)
MD. Rafiur Rahman (Student ID 446)
Md. Shuaib Shahriar Rusho (Student ID 457)

MBA Program, 2nd Batch

Department of Finance & Banking
Jahangirnagar University, Savar, Dhaka

April 01, 2016

Calculation of required level of capital (Minimum T-1 Capital Ratio and Minimum Total Capital Ratio)
based on Guidelines on Risk Based Capital Adequacy:
According to the Bangladesh Bank Guideline the Phase-in arrangements for Basel III
implementation in Bangladesh is Minimum Common Equity Tier 1 (CET1) Capital
Ratio
Capital Conservation Buffer
Minimum CET1 plus Capital Conservation
Buffer
Minimum T-1 Capital Ratio
Minimum Total Capital Ratio
Minimum Total Capital plus Capital
Conservation Buffer

2015
4.50%

2016
4.50%

2017
4.50%

2018
4.50%

2019
4.50%

4. 50%

0.625%
5.125%

1.25%
5.75%

1.875%
6.375%

2.50%
7.00%

5.50% 5.50%
6.00%
6.00%
6.00%
10.00% 10.00% 10.00% 10.00% 10.00%
10.00% 10.625% 11.25% 11.875% 12.50%

Exposure wise risk weights against different rating grades of BB are given in the below Table. Where
an exposure is secured by guarantee or eligible financial collateral, it may reduce its capital charge
by taking benefit of credit risk mitigation.
Step 1:
Capital Structure:
A Tier 1 (Core Capital) Going Concern
Common Equity Tier 1
1 Fully Paid-up Capital
2 Statutory Reserve
3 Non- repayable Share premium account
4 General Reserve
5 Retained Earnings
6 Dividend Equalization Account
7 Minority interest in Subsidiaries
8 Non- Cumulative irredeemable Preference shares
9 Other (if any item approved by Bangladesh Bank)
10 Sub-Total: (1 to 9)

Additional Tier 1
1 Non-cumulative Irredeemable Preference Share
2 Instruments (Perpetual in nature)
3 Minority Interest: i.e.: AT1 issued by consolidated subsidies

Amount
6,111.80
6,111.80
-130.00
1,248.12
356.00
---13,957.76

----

B Tier -2 (Supplementary Capital) Gone Concern

1 General Provision (Unclassified loans + SMA+ off balance sheet
exposure)
2 Assets Revaluation Reserves up to 50%

1,915.67
1,844.75

3 Revaluation Reserve for Securities up to 50%

4 Revaluation Reserve for equity instruments up to 10%
5 All other preferences shares
6 Subordinated debt
7 Other (if any item approved by Bangladesh Bank)

402.60
-----

8 Sub total (1 to 7)
9 Deductions from tier i and ii capital (if any)

4,163.02
--

C Total Eligible Capital (A+B)

18,120.78

Step 2:
Calculation of On and off balance sheet exposure, Market risk and Operational Risk.
As per the statements and disclosure given in the annual report the Off Balance Sheet Exposure is
given below:

a
)b
)c
d)

Exposure Type
Acceptances and endorsements
Letters of guarantee
Irrevocable letters of credit
Bills for collection
Total

2014
29,802.56
9,974.19
16,329.55
5,152.72
61,259.03

Rate
100
100
100
100

Total
29,802.56
9,974.19
16,329.55
5,152.72
61,259.03

From the disclosure basel 2014 we have got the following key information about Market Risk:
Capital required (Solo basis) for market risk as on the reporting date follows:
a Interest rate risk
b Equities
c Foreign exchange risk
d Commodity risk
Total

575.02
448.63
120.86
1,144.51

From the disclosure basel 2014 we have got the following information about Operational Risk:
The capital requirement for operational risk is as follows:
Particulars
Last three year's average Gross Income (adjusted)
Capital charge required (15% of GI)

Solo (Bank)
10,443.47
1,566.52

As per the statements and disclosure given in the annual report the Off Balance Sheet Exposure is
given below:

S
aL
)b
)

Exposure Type
Cash
Claims on Bangladesh Government (Other than PSEs) and BB (denominated in
domestic and foreign currency)

c
)

Claims on Public Sector Entities

Different Risk Weights
Unrated
Claims on Banks and NBFIs (denominated in domestic as well as foreign
i) Original maturity over 3 months:
currency)
Different Risk Weights
Unrated
ii) Original maturity less than 3 months
Claims on Corporate (excluding equity exposures):
Different Risk Weights
Unrated
Claims on SME
Rated
Unrated
Claims under Credit Risk Mitigation (Corporate)
Claims categorized as retail portfolio & Small Enterprise (excluding consumer
finance and staff loans)

d
)

2014
1,706.94
18,586.7
8
930.77
24.71

Rate
0
0

0
0

Total
0
0
0
0
0

2,587.54
1,569.48
5,012.28

100
100
100

58,507.1
13,345.9
8

125
125

1,040.22
15,703.9
788.26
9
2,242.79

100
100
100
100

Claims Under Credit Risk Mitigation (Consumer)

Claims categorized as retail portfolio (excluding consumer finance, small
enterprise and staff loans) up to 1 Crore
Consumer finance
Claims fully secured by residential property (excluding staff loan)
1. Past Due Claims (Risk weights are to be assigned net of specific provision):
Where specific provisions are less than 20 percent of the outstanding amount of
the past due claim

2,849.11
21.21

100
100

2849.1
21.21
1

8214.18
908.70

100
50

8214.1
454.35
8

1,513.82

150

2270.7
3

Where specific provisions are no less than 20 percent of the outstanding amount
of the past due claim

1,053.55

100

1053.3
2

Where specific provisions are more than 50 percent of the outstanding amount
of the past due claim

364.02

50

182.01

2. Claims fully secured against residential property that are past due for more
than 90 days and/or impaired and specific provision held there-against is less
than 20% of outstanding amount.

12.21

100

12.21

3. Loans and claims fully secured against residential property that are past due
for more than 90 days and /or impaired and specific provision held there-against
is more than 20% of outstanding amount.
l) Capital market exposures
m Unlisted equity investments and regulatory capital instruments issued by other
) banks (other than those deducted from capital) held in banking book.

0.38

75

0.285

459.20
1,263.98

125
150

574
1895.9
7

7,086.87

150
100

0
7086.8
7
0

e
)
f)
g
h
)
)

i)
j)
k
)

n
o
)
p
)
)

Investments in venture capital

Investments in premises, plant and equipment and all other fixed assets
All other assets:
i) Claims on GoB & BB (e.g. Coupon Receivable from Govt. T Bonds &
reimbursable from BB on PSP, Shadharan shanchaypatra, etc.)
ii) Staff loan/investment
v) Other assets (net of specific provision, if any)
Total:

939.08
1,549.74
2,103.34
150,386.
23

0
20
100

2587.5
1569.4
4
5012.2
8
8
73133.
16682.
98
38
1040.2
15703.
2
788.26
99
2242.7
9

309.94
2103.3
8
145788
4
.4

Step 3:
Calculation of Capital Adequacy
Total Tire 1 Capital
Minimum T-1 Capital Ratio =
Credit RWA + Market RWA + Operational RWA
= (13,957.76)/ (145788.4+61,259.03+1,144.51+1,566.52)
= 0.066542*100 = 6.6542%
Based on the data of 2014 Eastern Bank LTD has a comfort zone. According to the Basel 3 the
requirement is 5.5% but the percentage indicates 6.6542%. So the bank is maintaining Minimum T-1
Capital in order to maintain its adequacy.
The Capital to Risk-weighted Asset Ratio (CRAR) is calculated by taking eligible regulatory capital as
numerator and total RWA as denominator.
Total Eligible Capital
CRAR =
Credit RWA + Market RWA + Operational RWA

= (18,120.78)/ (145788.4+61,259.03+1,144.51+1,566.52)
= 0.086389*100 = 8.6389%
Based on the data of 2014 Eastern Bank LTD is not in the satisfactory zone. According to the Basel 3
he requirement is 10% but the percentage indicates 8.6389%. So the bank should maintain proper
capital in order to maintain its adequacy.

The following pages contain the financial statements of Estern Bank LTD of the year 2014.

Eastern Bank Limited

Balance Sheet
As at 31 December 2014
Note

2014
Taka

2013
Taka

PROPERTY AND ASSETS

Cash
Cash in hand (including foreign currencies)
Balances with Bangladesh Bank and its agent bank(s) (including foreign currencies)
Balances with other Banks and Financial Institutions
In Bangladesh
Outside Bangladesh

3
3.1
3.2
4
4.1
4.2

Money at call and short notice

Investments
Government
Others

5
6
6.1
6.2

Loans and advances

Loans, Cash Credits, Overdraft etc.
Bills discounted and purchased

7
7.1
7.2

Fixed assets including land, building, furniture and fixtures

Other assets
Non banking assets
TOTAL ASSETS

8
9
10

LIABILITIES AND CAPITAL

Liabilities
Borrowing from other banks, financial institutions and agents
Deposits and other accounts
Current deposits & other accounts etc.
Bills payable
Savings bank deposits
Fixed deposits
Bearer certificates of deposits

11
12
12.1
12.2
12.3
12.4
12.5

Other liabilities
TOTAL LIABILITIES

13

SHAREHOLDERS' EQUITY
Share Capital-Paid up capital
Statutory reserve
Dividend equalisation reserve
Excess of reserve against pre-take over loss-BCCI
Asset revaluation reserve
Reserve for amortization of treasury securities (HTM)
Reserve for revaluation of treasury securities (HFT)

EASTERN BANK LIMITED

14
15
16
17
18
19
20
184

ANNUAL REPORT 2014

1,706,937,953
8,594,833,742

1,752,660,726
6,428,136,805

10,301,771,695

8,180,797,531

5,349,573,125
1,034,533,216

8,012,554,438
2,390,509,831

6,384,106,341

10,403,064,269

1,060,000,000

21,224,314,333
3,430,622,784

21,659,579,849
4,244,004,844

24,654,937,117

25,903,584,693

111,438,313,688
6,853,032,495

94,491,939,790
8,418,279,159

118,291,346,183

102,910,218,949

7,086,875,736
4,153,360,814
191,733,000

6,897,393,729
3,394,841,686
191,733,000

172,124,130,885

157,881,633,856

26,020,637,050

14,079,880,398

10,314,018,874
1,034,027,209
23,982,033,088
81,461,596,944
-

9,894,881,567
789,543,484
16,923,994,211
89,493,288,918
-

116,791,676,116

117,101,708,180

9,224,966,318

8,249,547,103

152,037,279,484

139,431,135,681

6,111,797,850
6,111,797,850
356,040,000
586,531,031
3,689,495,550
2,076,822
805,190,521

6,111,797,850
5,362,423,625
356,040,000
581,681,032
3,689,495,550
827,635
59,972,091

FINANCIAL REPORTS 2014

Eastern Bank Limited

Balance Sheet
As at 31 December 2014

Note

General reserve
Reserve for non banking assets
Foreign currency translation gain/(loss)
Profit & loss account - retained earnings
TOTAL SHAREHOLDERS' EQUITY
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

21
22
23
24

OFF BALANCE SHEET ITEMS

Contingent liabilities
Acceptances and endorsements
Letters of guarantees
Irrevocable letters of credit
Bills for collection
Other contingent liabilities

25
25.1
25.2
25.3
25.4

Other commitments
Documentary credits and short term trade-related transactions
Forward assets purchased and forward deposits placed
Undrawn note issuance and revolving underwriting facilities
Undrawn formal standby facilities, credit lines and other commitments
Claims against the Bank not acknowledged as debt
TOTAL OFF-BALANCE SHEET ITEMS

2014
Taka

2013
Taka

130,000,000
178,971,165
1,062,706
2,113,887,906

130,000,000
178,971,165
(781,214)
1,980,070,442

20,086,851,401
172,124,130,885

18,450,498,175
157,881,633,856

29,802,563,348
9,974,191,339
16,329,554,466
5,152,721,657
-

26,827,594,612
12,515,097,423
15,562,071,032
5,110,318,372
-

61,259,030,810

60,015,081,437

61,259,030,810

60,015,081,437

These financial statements should be read in conjunction with the annexed notes.

Chairman

Director

Director

Managing Director & CEO

Dhaka, 25 February 2015

Signed as per our annexed report of same date

Hoda Vasi Chowdhury and Co.

Chartered Accountants

EASTERN BANK LIMITED

185

ANNUAL REPORT 2014

Eastern Bank Limited

Profit & Loss Account
For the year ended 31 December 2014
Particulars

Note

2014
Taka

2013
Taka

Interest Income
Less: Interest paid on deposits and borrowings
Net Interest Income

26
27

13,159,969,636
9,150,812,052
4,009,157,584

14,807,156,889
9,915,598,012
4,891,558,876

Income from investments

Fees, commission and brokerage
Other operating income
Total operating income

28
29
30

3,343,293,787
2,631,754,006
149,981,889
10,134,187,267

2,070,848,267
2,357,317,315
149,648,740
9,469,373,198

Salary & allowances

Rent, taxes, insurance, utilities etc.
Legal & professional expenses
Postage, stamp, telecommunication etc.
Stationery, printing, advertisement etc.
Managing Director's salary and allowances
Directors' Fees & Expenses
Audit fees
Charges on loan losses
Repairs, maintenance and depreciation
Other operating expenses
Total operating expenses
Profit before provisions
Provision for loans and advances
Specific provision
General provision

31
32
33
34
35
36
37
38

2,374,178,826
535,990,983
56,859,201
123,655,535
248,638,946
17,980,516
3,632,300
460,000
424,200,508
573,176,266
4,358,773,082
5,775,414,185

1,963,508,938
423,237,948
50,841,431
102,784,849
233,344,345
16,155,930
3,002,587
460,000
436,238,593
451,542,538
3,681,117,160
5,788,256,038

1,540,210,858
270,983,161
1,811,194,019
(8,840,067)
1,802,353,952
3,973,060,233
(1,995,209,737)
128,661,236
2,106,511,733

706,268,210
84,148,586
790,416,796
162,092,275
952,509,071
4,835,746,967
(2,589,787,489)
321,904,353
2,567,863,831

15

(749,374,225)
(749,374,225)
1,357,137,508

(967,149,393)
(967,149,393)
1,600,714,437

43

3.45

4.20

39
40

13.4.1

Other provisions
Total provisions
Profit before tax for the year
Provision for tax made for the year
Deferred tax income
Profit after tax for the year
Appropriation
Statutory reserve
General reserve

41

13.3.1
42

Retained earnings carried forward

Earnings per share (EPS)
These financial statements should be read in conjunction with the annexed notes.

Chairman

Director

Director

Managing Director & CEO

Dhaka, 25 February 2015

Signed as per our annexed report of same date

Hoda Vasi Chowdhury and Co.

Chartered Accountants
EASTERN BANK LIMITED

186

ANNUAL REPORT 2014

FINANCIAL REPORTS 2014

Eastern Bank Limited

Cash Flow Statement
For the year ended 31 December 2014

Note
A)

B)

C)

D)
E)
F)
G)

2014
Taka

2013
Taka

Cash flows from operating activities

Interest received
Interest paid
Dividend received
Fees and commission received
Income from investment
Recovery of loans previously written off
13.4.1
Cash paid to employees (including directors)
Cash paid to suppliers
Income taxes paid
13.3.2
Received from other operating activities
Paid for other operating activities
Operating cash flow before changes in operating assets and liabilities
Increase/(decrease) in Operating Assets & Liabilities
Changes in trading securities
Loans and advances to customers (other than banks)
Non banking assets
Other assets
44
Deposits from other Banks
12.a.1
Deposits from customers (other than banks)
Recovery from/ (Payment against) BCCI assets
Liability for tax
Liabilities for provision
Other liabilities
45
Net Cash (used in)/received from operating activities
Cash flows from investing activities
Changes in non-trading securities
Purchase/sale of property, plant and equipment
Investment in Subsidiary-EBL Securities Limited
Investment in Subsidiary-EBL Finance (HK) Limited
Investment in Subsidiary-EBL Asset Management Limited
Net cash (used in)/received from investing activities
Cash flows from financing activities
Borrowings from other banks, financial institutions and agents
Dividend paid (cash dividend)
Net cash received from/(used in) financing activities
Net (decrease) / increase in cash (A+B+C)
Effects of exchange rate changes on cash and cash equivalents
Opening cash and cash-equivalents
Closing cash and cash-equivalents (D+E+F)*
*Closing cash and cash-equivalents
Cash in hand (including foreign currencies)
Balances with Bangladesh Bank and its agent bank (s)
Balances with other Banks and Financial Institutions
Money at call and short notice
Prize bonds

3.1
3.2
4
5
6.1

12,997,605,116
(9,308,330,074)
120,261,913
2,631,754,006
3,038,691,242
105,720,099
(2,367,069,819)
(1,389,345,173)
(2,399,835,591)
149,981,889
(335,984,815)
3,243,448,794

14,408,570,438
(9,317,789,985)
84,228,403
2,357,317,315
1,986,619,864
110,434,318
(1,962,667,455)
(1,246,447,167)
(2,464,182,418)
149,648,740
(220,839,863)
3,884,892,189

1,830,515,504
(15,146,692,288)
(596,249,022)
882,148,921
(979,169,306)
4,849,999
533,287,090
(1,908,074,051)
890,743,728
(11,245,190,630)

(9,907,493,070)
(6,037,021,054)
543,369
(339,180,805)
1,188,456,427
23,554,080,732
(20,283,906)
196,299,282
(1,062,943,389)
1,109,528,292
12,566,878,067

165,693,090
(426,673,459)
(49,999,900)
(310,980,268)

5,704,755,084
(1,158,509,656)
(100,000,000)
(7,538,698)
4,438,706,730

11,940,756,653
(1,222,359,570)
10,718,397,083
(837,773,815)
883,449
18,586,591,300
17,749,700,936

(17,078,192,640)
(1,222,359,570)
(18,300,552,210)
(1,294,967,413)
(5,551,374)
19,887,110,087
18,586,591,300

1,706,937,953
8,594,833,742
6,384,106,341
1,060,000,000
3,822,900
17,749,700,936

1,752,660,726
6,428,136,805
10,403,064,269
2,729,500
18,586,591,300

These financial statements should be read in conjunction with the annexed notes.

Chairman

Director

Director

Dhaka, 25 February 2015

EASTERN BANK LIMITED

187

ANNUAL REPORT 2014

Managing Director & CEO