Wholesale Borrowing

 The wholesale borrowing Limit (WB) is regulatory guideline set by the Bangladesh Bank to limit over-reliance on short-term wholesale funding during times of abundant market liquidity and encourage better assessment of liquidity risk across all on and off-balance sheet items.

 The guidelines are intended to ensure that banks are able to access wholesale funding sources in a prudent and sustainable manner. Without compromising the financial stability of the system. The aim of the wholesale borrowing guidelines is to set a limit for borrowed fund. The limit should be set in absolute amount based on bank’s eligible capital (Tier-1, Tier-2) cand considering liquidity needs due to maturity mismatch, borrowing capacity of the bank and historic market liquidity.

WB covers call borrowing, Short Notice Deposit from banks and financial institutions, placement received with maturity less than 12 months, commercial paper similar instruments and overdrawn Nostro accounts.

 

The WB Limit should be capped at 80% (for non-PD banks) and 100% (for PD banks) of banks’ eligible capital on fortnightly average basis with maximum two deviations (not more than 90% and 110% of the eligible capital for Non-PD and PD Banks respectively) in a particular fortnight. The maximum cumulative outflow (MCO) should ideally not exceed 20% of the total balance sheet.