Professional Documents
Culture Documents
Formulating SME credit policy and programs Bringing Discipline in SME Financing Performing Environment Friendly SME Activities Emphasis has been shifted from large credit to small credit Emphasis on manufacturing and service sector.
Micro
< 0.50
< 0.50
10-24
< 10
< 10
Small
25- 99
10-25
10-25
Medium
100-250
50-100
50-100
6.69 4.86
0
2010 2011 2012
SME Credit has a persistent increase over the last three years. Financial Institutes set their targets by themselves and achieve targets.
Target
Achievement
Year
Share
51.87%
45.77%
60%
2010
2011 2012
2.88
3.23 4.73
6.69
6. 71 8.72
40% 20% 0%
2010 2011 2012 43.02% 48.13% 54.23%
Small
Medium
31.4% 31.0%
30.0%
29.4% 28.3%
1 0.5 0
2010
2011 Disbursement
2012 Share
SME Credit Performance Rating of Banks/NBFIs on the basis of target achievement, sectoral segregation, women Entrepreneur financing, cluster financing & promotional activities.
3.8%
3.8% 3.6%
3.4%
3.4%
0.05
0 2010 2011 Disbursement
3.2% 3.2%
3.0% 2012 share
22.9%
21.5%
6.12% 3.36%
6.71%
21.2%
SME credit has overall increase over the last three years.
Non performing loan in SME sector is always much lower than NPL in overall credit. An increase in the NPL in the SME sector (also in overall credit) may be explained by introduction of newer loan classification system under BASEL II .
Safeguarding and maintaining financial stability for achieving and maintaining price stability.
Amount
% of the Industry
Amount
Amount
% of the Industry
Amount
% of the Industry
47 4 4 30 9
95.5%
92.6%
96.9%
NBFIs
31
164
3960.0
4.5%
1593.7
2.5%
4137.0
7.4%
371.2
3.1%
Total
78
8223
87639.5
100%
64948.1
100%
56015.6
100%
11952.7
100%
Objective:
To ensure soundness and stability of the banking system.
Banks
Revised Guidelines on Stress Testing
Issued on February 23, 2011 Incorporate some new issues Sensitivity Analysis for Interest Rate based Stress Test International standard practice for liquidity Stress Test Inclusion of VaR Analysis Changing Frequency LevelQuarterly
NBFIs
Revised Guidelines on Stress Testing for NBFIs Issued on 12 July, 2012 Incorporating New dimensions
Introducing Insolvency Ratio (IR) Introducing Stress Testing Rating Scale (WAR-WIR)
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Bangladesh Banks Stress testing Guidelines At the system levelStress Tests are primarily designed to quantify the impact of possible changes in economic environment on the financial system.
At Institutional Level Stress Test technique provide a way to quantify the impact of changes in a number of risk factors on the assets and liabilities portfolio of the institution.
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the extent to which their asset quality might be affected by an economic downturn.
how the value of their securities holdings might be affected by changes in interest rates/credit spreads. provide banks with more forward-looking information to manage their risks and enable them to be better prepared for stressed situations.
Supervisors can make use of stress tests to monitor the risk profile of individual banks and assess the strength and soundness of the banking system.
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Construction of a Scenario
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F.Ex Rate
5 Risk Factors
Stock Prices
NPLs
Each of the five risk factors has been given shocks of three different levels. The magnitude of shock has been defined separately for each risk factor for all the three levels of shocks.
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Techniques
Simple Sensitivity Analysis
Measures the change in the value of portfolio for shocks of various degrees to different independent risk factors . Ex.: Adverse movement of intt. Rate by 100 basis and 200 basis. The Impact will be measured only on dependent variable (e.g. Capital)
Scenario Analysis
Encompasses the situation where a change in one risk factor affects a number of other risk factors or there is a simultaneous move in a group of risk factors. Stress testing can be based on The historical scenarios- a backward looking approach, or The hypothetical scenario-a forward-looking approach. Maximum Shock Scenario measures the change in the risk factor in worst-case scenario (level that wipe out Capital)
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The Banking system in Bangladesh is largely risk sensitive to the credit risk. Intt. Rate Risk, Ex. Rate Risk, Equity Price Risk do no bring down the CAR below the required level.
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3
3 3
0
2 7
1
1 2
0
0 0
1
1 2
5
7 14
25
Linkage Between Stress Testing and SME Financing For SME provisioning is set at 0.25% against 1.0% provisioning for other credits Credit Shock leads to Capital Adequacy Shock
UC
Rate of Provision
SMA
SS
DF
BL
0.25%
Minor
Moderate
Major
BRAC
Exim UCBL AB Bank IBBL IFIC
48.7
38.8 35.9 32.3 31.5 26.5
11.6
10.89 10.44 11.37 13.09 10.01
DBBL
25.1%
11.23
A new department established in Bangladesh Bank. However, the bank is working under a lot of limitations.
Future Planning
Start up financing Credit Guarantee/Insurance Scheme Venture Capital Financing Extending refinancing and prefinancing SME deposit mobilization Cluster mapping SME product marketing, specially web based marketing Non Financial Services, Governance Rating of Fis on the basis of SME financing Stress testing Other modern techniques and tools to make SME financing profitable, secured & entrepreneur friendly. Communication with international world to large extent to get benefit of modern technologies.
Reporting
Reporting