The major guidelines regarding capital management are as pointed below:
1. Tier-1
Core Capital:
a) Paid up capital
b) Non-repayable share premium account
c)
Statutory reserve
d) General reserve
e) Retained earnings
f) Minority interest in subsidiaries
g) Non-cumulative irredeemable preference shares h) Dividend equalization account
2. Tier-2 Supplementary Capital:
a) General provision
b) Revaluation reserves
- Fixed assets
- Securities
-
Equity instrument
c) All other preference shares d) Subordinated debt
3. Tier-3 Additional Supplementary Capital: Short-term subordinated debt that
original maturity 2 to 5 years.
4. Foreign banks operating:
a) Tier-1 consists-
-
Funds from head
office
-
Remittable profit retained
- Other items approved by BB
b) Tier-2 consists-
- General provision
-
Borrowing from head office in foreign currency
-
Revaluation of securities
- Other items approved by BB
5. Conditions pf maintaining capital:
a) Tier-2 will be limited to 100% of amount of Tier-1
b) 50% of revaluation reserves for fixed assets & securities eligible for Tier-2
c)
10% of revaluation reserves for equity instruments eligible for Tier-2
d) Subordinated debt should limited up to 30% of the amount of Tier-1
e) Limitation of Tier 3: 28.5% market risk needs to support by Tier-1. Market
Risk support from Tier-3 should up to 250% of Tier-1