Welcome to the

Presentation

Stress Testing
of
Uttara Bank Ltd.-2010

TANMOY DEBNATH
SUBHRA
BBA:13-080
MBA: 13-546

Stress Testing

Risk Management Tool

Evaluate the potential impact of a specific event or movement

Financial or macro variables on a bank or FI

All banks and other financial institutions

Must undergo Stress Tests

Send their respective stress test reports twice a year to

Bangladesh Bank

Banks & FIs the scope of the stress test is limited to Simple
Sensitivity Analysis.

Methodology & Calibration of

Shocks
Credit
Risk

Liquidity
Risk

Equity
Price
Risk

Interest
Rate
Risk

Exchang
e Rate
Risk

Capital Adequacy Ratio

Particular

Amounts

Total Eligible Tier-1 Capital (Core Capital)

5,907,000,000

Total Eligible Tier-2 Capital (Supplementary

Capital)

2,013,600,000

Total Eligible Capital

7,920,600,000

Capital Requirement for Credit Risk

47,747,200,000

Capital Requirement for Market Risk

13,692,100,000

Capital Requirement for Operational Risk

Total Risk Weighted Asset
Total Required Capital (10% of Total RWA)
Capital Surplus/(Shortfall)
Capital Adequacy Ratio

8,420,700,000
69,860,000,000
6,986,000,000
934,600,000
11.34%

Interest Rate Risk

Year
CAR
Magnitude of Shock
Revised CAR (%)
Fall in CAR (%)

1%
10.99%
0.35%

2010
11.34%
2%
10.64%
0.69%

3%
10.29%
1.05%

Higher the magnitude of shock lower the CAR because

the duration gap of Uttara Bank is positive.
The CAR of Uttara Bank would always be higher than
the required CAR under BASEL II (CAR = 10%) in
extreme interest rate shock

Exchange Rate Risk

Year
CAR
Magnitude of Shock
Revised CAR (%)
Fall in CAR (%)

5%
11.32%
0.02%

2010
11.34%
10%
11.30%
0.04%

15%
11.29%
0.05%

Net exposure in foreign currency was always positive

for Uttara Bank
The Bank was in Net Long Position from in 2010
The Bank would be able to maintain Required CAR in
all levels of shock in 2010

Credit Risk
Increase in NPLs
Shift in NPLs Categories
Increase of NPLs in Particular 1 or 2 Sector
(Business)
Increase of the NPLs due to Default of Top 10
large borrowers
Extreme Events
Cumulative Impact of All Credit Shock

Equity Price Risk

Year
CAR
Magnitude of Shock
Revised CAR (%)
Fall in CAR (%)

10%
11.33%
0.01%

2010
11.34%
20%
11.32%
0.02%

UBL was very much robust in Equity Price Risk

Few changes for all levels of shocks

The Bank would able to maintain required Capital
Adequacy Ratio in all levels of shock in 2010

40%
11.30%
0.04%

Liquidity Risk
Year
Liquidity Ratio
Magnitude of Shock
Revised Liquidity Ratio (%)
Increase in Liquidity Ratio (%)

2010

109.28%
10%
110.31%
1.03%

20%
111.59%
2.32%

30%
115.46%
6.18%

Liquid Assets Cash, Balances with other Banks &

Financial Institutions, Money at Call & investment in
Government Securities
Liquid Liabilities Borrowings from other Banks &
Financial Institutions & Agents, Currents & other
Accounts
Liquidity crisis of UBL would have been severe in minor
shock

Thank You all