The calculation of the Wholesale Borrowing Guidelines (WBG) as per the BB circular involves the following steps:
Step 1:
Determine the Eligibility Criteria: the first step is to ensure that the NBFI
meets the eligibility criteria set by the BB circular. The eligibility criteria
include maintaining a minimum capital requirement, complying with prudential
norms on capital adequacy and asset classification, and maintaining a track
record of profitability and regulatory compliance.
Step 2:
Determine the Borrowing Limits: the WBG sets limits on the amount of wholesale
funding that NBFIs can raise from a single lender or group of related lenders.
The limits depend on the NBFI's Net Asset Value (NAV), as follows:
· For NBFIs with NAV up to Tk. 100 crore: The borrowing limit is up to 10 times the NBFI's NAV or Tk. 500 crore, whichever is lower
· For NBFIs with NAV above Tk. 100 crore: The borrowing limit is up to 15 times the NBFIS NAV or Tk. 1,000 crore, whichever is lower.
Step 3: Determine the Concentration Limit: The WBG also sets concentration limits to reduce the risk associated with borrowing from a single lender or group of related lenders. The concentration limit for NBFIs is set at 30% of the NBFI's total borrowing
Step 4: Determine the Compliance with the WBG Finally, the NBFI needs to ensure compliance with the WBG and submit periodic reports to the Bangladesh Bank on their wholesale borrowing activities. The reports should include details of the NBFI's borrowing from different sources, concentration risk, and compliance with the WBG.
Basically, WB covers call borrowing, Short Notice Deposits from banks and financial institutions, placement received with maturity less than 12 months, commercial papers/similar instruments, and overdrawn Nostro accounts.
The WB Limit should be capped at 80% (for Non-Primary Dealers banks) and 100% (for Primary Dealers banks) of the bank's eligible capital on a fortnightly average basis with a maximum of two deviations (not more than 90% and 110% of the eligible capital for Non-PD and PD banks respectively) in a particular fortnight.
The
eligible capital determined under Basel III for any quarter will be applicable
as eligible capital until it is determined for the next quarter. The above
limit shall be considered as an aggregate limit for banks having dual
businesses (i.e. both conventional and Islamic banking operations) In summary,
the calculation of the Wholesale Borrowing Guidelines (WBG) as per the BB
circular involves determining the eligibility criteria, borrowing limits,
concentration limits, and compliance requirements for the NBFL