Disclosures on Risk Based Capital (BASEL III)

For the year ended 31 December, 2021

Introduction

In Compliance with Pillar III of the revised Framework for International Convergence of Capital
Measurement and Capital Standards (BASEL III) and adopted under the Bangladesh Bank rules and
regulations on risk based capital adequacy as per BRPD circular no 18 dated December 21, 2014
(Implementation of BASEL III in Bangladesh), more elaborate and expended public disclosure is
required regarding risk profile as per following breakdown.

Components of Disclosure Framework

1. Scope of application
2. Capital Structure
3. Capital Adequacy
4. Credit Risk
5. Equities: disclosures for banking book positions
6. Interest rate risk in the banking book (IRRBB)
7. Market risk
8. Operational Risk
9. Liquidity Ratio
10. Leverage Ratio
11. Remuneration
1. Scope of application

The Risk Based Capital Adequacy framework applies to all banks on Solo and consolidated basis,
where ‘Solo’ basis refers to all positions of the bank and ‘Consolidated’ basis includes subsidiary
company of ONE Securities Limited.

a) The name of the top corporate entity in the group ONE Bank Limited
to which this guidelines applies.
b) An outline of differences in the basis of The consolidated financial statements of the Bank
consolidation for accounting and regulatory include the financial statements of (i) ONE Bank
purposes, with a brief description of the entities Limited, and (ii) ONE Securities Limited.
within the group: ONE Bank holds 99.99%, shares of ONE Securities
(i) that are fully consolidated Limited.
(ii) that are given a deduction treatment; and The bank has an approved disclosure policy to
(iii) that are neither consolidated nor observe the disclosure requirements set out by the
deducted (e.g. where the investment is risk Bangladesh Bank and International Financial
weighted). Reporting Standard (IFRS) and International
Accounting Standards (IAS) as adopted by the
Institute of Chartered Accountants of Bangladesh
(ICAB) into Bangladesh Financial Reporting
Standards (BFRS) and Bangladesh Accounting
Standards (BAS) where relevant to the bank.

ONE Bank Ltd. (the “Bank”) is a private sector

commercial bank incorporated with the Registrar of
Joint Stock Companies under the Companies Act
1994. The Bank commenced its banking operation on
14 July, 1999 by obtaining license from the
Bangladesh Bank on 2 July, 1999 under section 31 of
the Bank Company Act 1991.

ONE Securities Limited (OSL) is a subsidiary of

ONE Bank Limited. OSL was incorporated on May
04, 2011 under the Companies Act (Act XVIII) of
1994 as a Private Limited Company. Subsequently, it
was converted into Public Limited Company on
December 24, 2014 after completion of due
formalities with Registrar of Joint Stock Companies
and Firms (RJSC).

ONE Investments Limited (OIL) is a subsidiary of

ONE Bank Limited. OIL was incorporated on April
26, 2018 under the Companies Act (Act XVIII) of
1994 as a Private Limited Company after completion
of the formalities with the Registrar of Joint Stock
Companies and Firms (RJSC). The Registered Office
of the Company is situated at HRC Bhaban, 46
Kawran Bazar C.A., Dhaka-1215.
 c) Any restrictions, or other major impediment, on Not applicable
transfer of funds or regulatory capital within the
group.
d) The aggregate amount of capital deficiencies in Not applicable
all subsidiaries not included in the consolidation
that are deducted and the names(s) of such
subsidiaries.

2. Capital Structure
a. Qualitative Disclosures

a) Summary information on the terms In terms of Section 13 of the Bank Company Act, 1991 (Amended
and conditions of the main features up to 2013), the terms and conditions of the main features of all
of all capital instruments, capital instruments have been segregated in terms of the eligibility
especially in the case of capital criteria set forth vide BRPD Circular No. 18 dated 21 December
instruments eligible for inclusion 2014 and other relevant instructions given by Bangladesh Bank from
in Tier 1, Additional Tier 1or in time to time. The main features of the capital instruments are as
Tier 2. follows:
1. Tier 1 Capital (a+ b) (Going-concern capital)
a) Common Equity Tier-1 Capital (CET-1):
 Paid-up share capital
 Non-repayable share premium
 Statutory Reserve
 General Reserve
 Retained Earnings
 Dividend Equalization Fund
 Minority Interest in Subsidiaries

Regulatory Adjustments from Tier-1 capital-

 Shortfall in provisions required against Non Performing
Loans
 Shortfall in provisions required against investment in shares
 Goodwill and all other Intangible Assets (if derecognized by
relevant Accounting Standards)
 Deferred Tax Assets (DTA)
 Defined benefit pension fund assets
 Gain on sale related to securitization transactions
 Investment in own CET-1 Instruments/Shares
 Reciprocal Crossholdings in the CET-1 Capital of Banking,
Financial and Insurance Entities
 Investments in subsidiaries which are not consolidated (50%
of Investment)

b) Additional Tier-1 Capital :

 Perpetual Instrument.
 2. Tier-2 Capital (Gone-concern capital) :
 General Provision
 All Other preference shares
 Subordinated debt
 Minority Interest i.e. Tier-2 issued by consolidated
subsidiaries to third parties
Regulatory Adjustments from Tier-2 capital-
 Investment in own T-2 instruments/Shares
 Reciprocal crossholdings in the T-2 Capital of Banking,
Financial and Insurance Entities
 Any investment exceeding the approved limit under section 26
ka(1) of Bank Company Act, 1991
 Investments in subsidiaries which are not consolidated (50% of
Investment)

b. Quantitative Disclosures
Amount in crore Taka
a) Tier-1 Capital (Going-concern capital) Solo Consolidated
1. Common Equity Tier-1
 Paid up capital 934.04 934.04
 Statutory Reserve 672.14 672.14
 Capital Reserve - 0.81
 Retained Earnings 100.72 123.80
 Minority Interest in Subsidiaries - 3.29
Sub total 1,706.90 1,734.09
Adjustment:
 Deferred Tax Assets (DTA) 8.46 8.46
 Goodwill and all other Intangible Assets 0.02 0.02
 Reciprocal Crossholdings 0.60 7.65
Total Common Equity Tier-1 Capital 1,697.81 1,717.96
2. Additional Tier-1 Capital 365.00 365.00
b) Tier-2 Capital (Gone-concern capital)
 General Provision 331.93 332.08
 Subordinated debt 400.00 400.00
Total Tier-2 Capital 731.93 732.08
Total Eligible Capital 2,794.74 2,815.04
3. Capital Adequacy
a. Qualitative Disclosures
a) A summary discussion of the Bank’s The Bank assesses the adequacy of its capital in terms of Section
approach to assessing the adequacy of 13 (1) of the Bank Company Act, 1991 (Amended up to 2013)
its capital to support current and future and instruction contained in BRPD Circular No. 18 dated 21
activities. December 2014 (Implementation of Basel III in Bangladesh).
However, in terms of the regulatory guidelines, the Bank
computes the capital charge / requirement as under:
(a) Credit risk : On the basis of Standardized Approach
(b) Market risk : On the basis of Standardized Approach; and
(c) Operational risk: On the basis of Basic Indicator
Approach.
As per Basel-III norms, capital adequacy i.e. buffer capital is
must for banks to protect the unexpected losses against the risk
profile and future business growth of the bank. As per new
guidelines, Capital Conservation Buffer @ 2.50% in the form of
tier-1 capital is to maintain to absorb more shocks in addition to
10% in earlier requirement. Under the Standardized Approach of
the RBCA guidelines of Basel-III, counterparties credit rating
are determined on the basis of risk profile assessed by the
External Credit Assessment Institutions (ECAIs) duly
recognized by Bangladesh Bank to derive risk-weights of
exposures under the portfolio of claims. According to the
guideline, the rated exposures of a bank will reduce the Risk
Weights and the regulatory capital requirement as well as create
the room to expand the business of the bank. This will also
enable the bank to assess the creditworthiness of the borrowers
as well, to an acceptable level.

To maintain adequate capital OBL has already issued three

Subordinated Bonds i. e., (a) Subordinated Bond-1 of Tk. 220
crore issued on 26th December 2013 (qualifying amount as on
31st December, 2021 is nil), (b) Subordinated Bond-2 of Tk. 400
crore issued on 27th October 2016 (qualifying amount as on 31st
December, 2021 is Tk. 80 crore) and (c) Subordinated Bond-3 of
Tk. 400 crore issued in 2019(qualifying amount as on 31st December,
2021 is Tk. 320 crore). To strengthen the Tier-1 capital, issuance
of perpetual Bond of Tk. 400 crore is under process and
maximum portion thereof Tk. 365 crore has already been issued
by December 2021. The remaining portion of the perpetual bond
will be issued hopefully very soon. As a result, OBL has
adequate capital against the regulatory requirement to upheld
and strengthen the confidence of its investors, Depositors and
other stakeholders. The Board of Directors & the Senior
Management of the bank emphasized rigorously round the year
2021 on corporate borrowers credit rating to lower our risk
profile as well as to reduce the capital requirement of the bank.
Accordingly, Asset Marketing & Credit Risk Management
(CRM) teams have taken all-out efforts to increase the number
of corporate borrower’s exposures under rated. They are
 constantly taking the initiatives through guidance of the Senior
Management; series of meetings, correspondence, awareness
program with the allied concerns i.e. branches of the bank &
ECAIs.

As per BASEL-III Guidelines, a BASEL Committee comprised

of senior Management / Department Heads of relevant sectors
have been formed to conduct quarterly meeting chaired by
Managing Director to supervise and implement the instructions
of regulatory requirement as per Bangladesh Bank Guidelines.
b. Quantitative Disclosure:
Amount in crore Taka
Particulars Solo Consolidated
Credit Risk Weighted Assets 20,449.18 20,219.91
On- Balance sheet 19,575.71 19,346.45
Off-Balance sheet 873.47 873.47
Market Risk Weighted Assets 426.19 714.44
Operational Risk Weighted Assets 2,347.86 2,366.69
Total Risk Weighted Assets 23,223.23 23,301.05
Required Capital against Credit, Market and Operational 2,322.32 2,330.10
Risk

1. Tier-1 Capital (2+3) 2,062.82 2082.96

2. Common Equity Tier-1 Capital (CET-1) 1,697.82 1,717.96
3. Additional Tier-1 Capital (AT-1) 365.00 365.00
4. Tier-2 Capital 731.93 732.08
Total Regulatory Capital (1+4) : 2,794.74 2,815.04
Capital to Risk Weighted Assets Ratio (CRAR) 12.03% 12.08%
Common Equity Tier-1 to RWA 7.31% 7.37%
Tier-1 Capital to RWA 8.88% 8.94%
Tier-2 Capital to RWA 3.15% 4.14%

ONE Bank Ltd finalized the Financial Statements of 2021 considering the instruction given by Bangladesh Bank vide
letter DOS(CAMS)-1157/41(Dividend)/2022-2295 dated 28 April 2022 to defer the provision shortfall of Tk. 967.99
crore (General Provision Tk. 661.33 crore and Specific Provision Tk. 306.66 crore) over the next 5 years (i.e. 2022 to
2026).

.
4. Credit Risk
a. Qualitative Disclosure:

Credit risk is the risk of financial loss resulting from failure by a client or counterparty to meet its
contractual obligations to the Bank. Credit risk arises from the bank’s dealings with or lending to corporate,
individuals and other banks or financial institutions. ONE Bank is managing Credit Risk through a robust
process that enables the bank to proactively manage loan portfolios in order to minimize losses and earn an
acceptable level of return for shareholders.

4.1. Definitions of past due and impaired

ONE Bank Limited follows the Bangladesh Bank guidelines and definitions of past due and impaired loans as
below:

Loan Type Default Classified / Impaired

Past due Special SS DF BL

Mention

Continuous If not A continuous If it remains If it remains If it remains

Loan repaid/renewed Credit, past due past due past due
within the fixed Demand Loan /overdue for 3 /overdue for 9 /overdue for 12
expiry date for or a Term months or months or months or
repayment or after Loan which beyond but less beyond but beyond.
the demand by the will remain than 9 months. less than 12
Bank is treated as overdue for a months.
past due/overdue period of 02
from the following (two) months
day of the expiry or more will be
date. treated as
Special
Demand If not repaid within Mention If it remains If it remains If it remains
Loan the fixed expiry date Account past past due/ past due/
for repayment or (SMA). due/overdue overdue for 9 overdue for 12
after the demand by for 3 months or months or months or
the bank will be beyond but less beyond but beyond from
treated as past than 9 months less than 12 the date of
due/overdue/ from the date months from claim by the
overdue from the of expiry / the date of bank or from
following day of the claim by the claim by the the date of
expiry date. bank or from bank or from creation of the
the date of the date of forced loan
creation of the creation of the
forced loan forced loan

Term Loan In case any If the amount If the amount If the amount
Loan Type Default Classified / Impaired

Past due Special SS DF BL

Mention

upto installment (s) or of past due of past due of past due

Tk.10.00 part of installment installment is installment is installment is
lac (s) of a Fixed Term equal to or equal to or equal to or
Loan upto Tk.10.00 more than the more than the more than the
lac is not repaid amount of amount of amount of
within the due date, installment (s) installment (s) installment (s)
the amount of due within 3 due within 9 due for 12
unpaid installment months, the months, the months or
(s) will be termed as entire loan will entire loan beyond, the
past due /overdue be classified as will be entire loan will
installments from ``Sub- classified as be classified as
the following day of standard''. ''Doubtful”. ''Bad /Loss''
the due date

Term Loan In case any If the amount If the amount If the amount
above installment (s) or of past due of past due of past due
Tk.10.00 part of installment installment is installment is installment is
lac (s) of a Fixed Term equal to or equal to or equal to or
Loan above Tk. more than the more than the more than the
10.00 lac is not amount of amount of amount of
repaid within the due installment (s) installment (s) installment (s)
date, the amount of due within 3 due within 9 due for 12
unpaid installment months, the months, the months or
(s) will be termed as entire loan will entire loan beyond, the
past due /overdue be classified as will be entire loan will
installments from ``Sub- classified as be classified as
the following day of standard''. ''Doubtful”. ''Bad /Loss''
the due date

Short-term If not repaid within the fixed expiry If irregular after a period after a period
Agricultura date for repayment will be considered status of 36 months of 60 months
l and Micro past due / overdue after six months of continues, the
- Credit the expiry date. credit will be
classified as
'Substandard '
after a period
of 12 months,
ONE Bank Limited follows the Bangladesh Bank guidelines and definitions of past due and impaired loans of CMSME as
below:

Loan Type Default Classified / Impaired

Past due Special SS DF BL

Mention

Continuous If not repaid/renewed If it remains

If it remains
Loan within the fixed expiry past due
past due If it remains past
date for repayment or /overdue for a
/overdue for 18 due /overdue for
after the demand by period of 6
months or a period of 30
Demand the Bank is treated as months or
beyond but less months or
Loan past due/overdue from beyond but
than 30 beyond.
the following day of less than 18
months.
the expiry date. months.

Fixed Term In case any installment A continuous If the amount If the amount If the amount of
Loan (s) or part of Credit, Demand of past due of past due past due
installment (s) of a Loan or a Term installment is installment is installment is
Fixed Term Loan is Loan which will equal to or equal to or equal to or more
not repaid within the remain overdue more than the more than the than the amount
due date, the amount for a period of amount of amount of of installment
of unpaid installment 02 (two) months installment (s) installment (s) (s) past
(s) will be termed as or more will be past past due/overdue for
past due /overdue treated as due/overdue due/overdue for a period of 30
installments from the Special Mention for a period of a period of 18 months or
following day of the Account (SMA). 6 months or months or beyond, the
due date beyond but beyond but less entire loan will
less than 18 than 30 be classified as
months, the months, the ``Bad/Loss''.
entire loan entire loan will
will be be classified as
classified as ``Doubtful''.
``Sub-
standard''.

4.2 Description of approaches followed for specific and general allowances

ONE Bank Limited follows the General and Specific Provision requirement as prescribed by Bangladesh Bank
from time to time.
4.3 Methods used to measure credit risk

In compliance with Risk Based Capital Adequacy, OBL, as per BASEL-III Guideline, uses ratings assigned by
External Credit Assessment Agencies (ECAIs) approved by Bangladesh Bank. The rating is used for both fund
based and Non-fund based exposure for corporate borrowers. Corporate, which are yet to get the ratings from
these rating agencies, are treated as 'Unrated'.
OBL also uses the Credit Risk Grading System as introduced by Bangladesh Bank before taking any exposure
on Corporate and Medium clients.

4.4 Credit Risk Management System

Credit Risk Management includes a host of management techniques, which help the banks in mitigating the
adverse impacts of credit risk. The objective of the Credit Risk Management is to identify measure, monitor and
control credit risk by adopting suitable methodology.

OBL Credit Policy laid down clear outlines from managing credit risk of the Bank. It gives organization
structure, defines role and responsibilities of credit handling officials and processes to identify, quantify and
manage credit risk.

Credit Risk management system of the Bank clearly defines the roles and responsibilities of the Marketing
Division, CRM Division & Credit Administration Department. Marketing division is responsible for Business
Solicitation / Relationship Management. CRM Division has been vested with the responsibilities relating to
credit approval, credit review, risk grading, credit MIS. The Bank has setup Project Appraisal & Monitoring
[PAM] Department under CRM Division manned with qualified Engineers for pre-sanction project appraisal &
monitoring of post-disbursement project implementation. Special Asset Management Department also reports to
Head of CRM Division relating to the management of impaired assets. Credit Administration Division has been
entrusted with completion of documentation formalities, loading of credit limits in the system, monitoring of
account movements & repayments.

The policy covers a structured and standardized credit approval process including a comprehensive credit
appraisal procedure. In order to assess the credit risk associated with any financing proposal, the Bank assesses
a variety of risks relating to the borrower and the relevant industry. The Bank evaluates borrower risk by
focusing:

 Borrower’s standing
 Borrower’s business and market position
 Financial position of the borrower by analyzing the financial statements, its past
financial performance, its financial flexibility in terms of ability to raise capital and
its cash flow adequacy.

The Board of Directors of the Bank has delegated Business Approval Power to the Head of CRM and Managing
Director. Credit facilities beyond the delegation are approved by the EC and / or Board.

The Bank manages its credit risk through continuous measuring and monitoring of risks at each obligor
(borrower) and portfolio level. ONE Bank is also considering credit ratings of the client assessed by ECAIs
while initiating any credit decision. A well structured Delegation and Sub‐delegation of Credit Approval
Authority is prevailing at ONE Bank Limited for ensuring goods governance and better control in credit
approval and monitoring.
4.5 Credit Risk Mitigation

Banks, for mitigating credit risks, usually accepts collaterals viz. cash and cash equivalents, registered mortgage
on land and building and hypothecation of inventory, receivables and machinery, motor vehicles, aircraft etc.
Housing loans are secured by the property/ asset being financed.

However, in compliance with Risk Based Capital Adequacy as prescribed by Bangladesh Bank OBL only
considers eligible financial collateral for risk mitigation as per Basel III guidelines.

The Bank accepts guarantees from individuals with considerable net worth and the Corporate, besides guarantee
issued by Government, other Commercial banks in line with present BASEL-III guidelines.

4.6 Policies and Processes for Collateral Valuation and Management

OBL has specific stipulations about acceptability, eligibility and mode of valuation of real estate collaterals
whereby independent qualified surveyors have been enlisted to perform the valuation job. Apart from
professional valuation, RMs and credit officers at Branch level physically verify the collateral offered and cross
check the professional valuation. Subsequently entire chain documents of the collateral are checked and vetted
both by OBL enlisted Panel Lawyers and Head Office Loan Administration Division so as to ensure clean title
and enforceability of the collateral.

b. Quantitative Disclosure:

a) Total gross credit risk Major types of credit exposure as per disclosures in the audited financial
exposures broken down statements as of 31 December, 2021
by major types of credit Particulars Outstanding Mix
exposures Amount (%)
Overdraft 4,114.11 18.47%
Export cash credit 684.75 3.07%
Transport loan 137.95 0.62%
House building loan 894.89 4.02%
Loan against trust receipt 510.66 2.29%
Term loan 9,758.85 43.82%
Payment against document 1,319.84 5.93%
Consumer Finance 310.16 1.39%
Staff loan 68.23 0.31%
Bills purchased and discounted 184.88 0.83%
Others 4,285.09 19.24%
Total loans and advances 22,269.41 100%
b) Geographical distribution Geographical distribution of credit exposures as per the disclosures in the
of exposures, broken audited financial statements as of 31 December, 2021 are as follows:
down in significant areas Amount in crore Taka
by major types of credit Particulars Outstanding Mix
exposure Loan (%)
Urban
Dhaka Division 14,853.79 66.70%
Chattogram Division 4,613.09 20.71%
Khulna Division 751.98 3.38%
Rajshahi Division 347.60 1.56%
Rangpur Division 85.77 0.39%
Barishal Division 63.18 0.28%
Sylhet Division 23.62 0.11%
Sub-total (Urban) 20,739.03 93.13%
Rural
Dhaka Division 974.27 4.37%
Chattogram Division 463.59 2.08%
Khulna Division 43.76 0.20%
Rajshahi Division 31.15 0.14%
Barishal Division 0 0.00%
Rangpur Division 0 0.00%
Sylhet Division 17.62 0.08%
Sub-total (Rural) 1,530.38 6.87%
Grand Total (Urban + Rural) 22,269.41 100%
c) By major industry or (a) Amount of impaired loans and if available, past due loans,
counterparty type provided separately
Amount of impaired / classified loans by major industry/sector-type as of
31 December, 2021 was as under:
Major industry/sector type Outstanding Mix
Amount in (%)
crore
Agriculture Financing 6.79 0.26%
Readymade Garments (RMG) Industries 358.15 13.92%
Textile Industries 194.60 7.56%
Ship Breaking 147.58 5.74%
Other Manufacturing Industries 503.32 19.56%
Small & Medium Enterprise (SME) Loans 476.55 18.52%
Construction Industries 50.48 1.96%
Transport and Storage 45.33 1.76%
Trade Services 706.16 27.45%
Commercial Real Estate Financing 48.58 1.89%
Residential Real Estate Financing 14.78 0.57%
Consumer Credit 19.11 0.74%
Others 1.37 0.05%
Total 2,572.80 100%
 b) Specific and general provisions
Specific and general provisions for loans portfolio and general provision for
off-balance sheet exposures of the Bank as per audited financial statements
as of 31 December, 2021 was as under:

Particulars of specific and general provisions for Amount in

entire loan portfolio and off-balance sheet exposures crore Taka
Specific provision for loans and advances 842.98
General provision for loans and advances 226.32
General provision for off-balance sheet exposures 52.80
Total 1,122.1

c) Charges for specific allowances and charges-offs (general allowances)

during the period

The Specific and general provisions for loans portfolio and general
provision for off-balance sheet exposures of the Bank charged during the
year as per audited financial statements for the year ended 31 December,
2021 was as under:

Particulars Amount in
crore Taka
Specific provision for loans and advances 167.62
General provision for loans and advances 32.78
General provision for off-balance sheet exposures (0.68)
Total 199.72

d) Non Performing Assets Position of Non Performing Loans and Advances including bills purchased
(NPAs) and discounted of the Bank as per audited financial statements for the year
ended 31 December, 2021 was as under:

Movement of Non-Performing Assets (NPAs) Amount in

crore Taka
Opening Balance 1,895.75
Additions 708.66
Reductions (31.60
Closing Balance 2,572.80
Movement of specific provisions for NPAs
Opening Balance 819.84
Provision made during the period 270.82
Recovery of written off Loan (144.48)
Write back of excess provision (103.20)
Closing balance 842.98
5. Equities: disclosures for Banking Book Positions

a. Qualitative Disclosures

a) The general qualitative disclosure requirement with respect to the equity risk, including:
Differentiation between holdings on which Investment in equity mainly for capital gain purpose but Bank
capital Gains are expected and those taken has some investment for relationship and strategic reasons.
under other Objectives including for
relationship and strategic reasons; and

Discussion of important policies covering Our investment in shares are being monitored and
the valuation and accounting of equity controlled by the Investment Committee are reflected in
holdings in the banking book. This accounts through proper methodologies and accounting
includes the accounting techniques and standards of the local &
valuation methodologies used, including International. The accounting policies, techniques and
key assumptions and practices affecting valuation methodologies were put in places as under:
valuation as well as significant changes in Particulars Valuation method
these practices. Shares:
Quoted At cost price. Adequate Provision
is made if the aggregated market
value falls below the cost price..
Unquoted At cost price.
Bonds:
Subordinated At redemption value.
bonds

b. Quantitative Disclosures

a) Value, disclosed in the balance sheet, Amount in crore Taka

of investments, as well as the fair Cost Market Value
value of those investments; for Particulars Bank Consolidated Bank Consolidated
quoted securities, a comparison to Position Position Position Position
publicly quoted share values where Quoted 51.49 224.21 96.02 238.68
the share price is materially different Share
from fair value. Unquoted 13.82 13.82 13.82 13.82
share
b) The cumulative realized gain (losses) The cumulative realized gain (losses):
arising from sales and liquidations in Amount in Crore Taka
the reporting period. Bank Position Consolidated Position
- Realized gain (losses) from equity 0 0
investments
c)  Total unrealized gains Total unrealized gains (losses)
(losses) Amount in Crore Taka
 Total latent revaluation gains Bank Position Consolidated Position
(losses) 44.53 14.47
 Any amounts of the above
included in Tier 2 capital
 d) Capital requirements broken down The capital requirements for equity investments as of
by appropriate equity groupings, 31 December, 2021 was as under:
consistent with the bank’s Amount in crore Taka
methodology, as well as the Particulars Amount Weight Capital
aggregate amounts and the type of (Market Charge
equity investments subject to any Value)
supervisory provisions regarding Specific Risk 96.02 0.10 9.60
regulatory capital requirements.
a) Capital requirements for General Market 96.02 0.10 9.60
equity investments Risk
- For Specific market risk Total 19.20
- For General market risk

6. Interest rate risk in the Banking Book (IRRBB)

a. Qualitative Disclosures
The general qualitative Interest rate risk is the potential impact on the Bank’s earnings and net
disclosure requirement asset values due to changes in market interest rates. Interest rate risk
including the nature of IRRBB arises when the Bank’s principal and interest cash flows (including final
and key assumptions regarding maturities), for both On and Off-balance sheet exposures, have
loan prepayments and behavior
of non- maturity deposits, and mismatched re-pricing dates. The amount at risk is a function of the
frequency of IRRBB magnitude and direction of interest rate changes and the size and maturity
measurement structure of the mismatch position. The portfolio of assets and liabilities
in the banking book sensitive to interest rate changes is the element of
interest rate risk.
The immediate impact of changes in interest rates is on the Bank’s net
interest income (difference between interest income accrued on rate
sensitive asset portfolio and interest expenses accrued on rate sensitive
liability portfolio) for particular period of time, while the long term
impact is on the Bank’s net worth since the economic value of the Bank’s
assets, liabilities and Off -balance sheet exposures are affected.
Key assumptions on loan prepayments and behavior of non-maturity
deposits:
a) loans with defined contractual maturity are re-priced in the
respective time buckets in which it falls as per the loan repayment
schedule;
b) loans without defined contractual maturity are segregated into
different time buckets based on the past trend, seasonality,
geographical perspective and reprised accordingly;
c) Non-maturity deposits namely current, saving deposits are
segregated into different time buckets on the basis of past trend of
withdrawal, seasonality, religious festivals, geographical
perspective and re-priced accordingly. However, the behavior of
withdrawal of non-maturity deposits of OBL is more or less
stable.
d) OBL measures the IRRBB as per the regulatory guidelines on a
quarterly rest.
b. Quantitative Disclosures
The impact of changes in interest rate for On-balance sheet rate sensitive assets and liabilities of OBL as per
the audited financial statements as of 31 December, 2021 is furnished below:
Amount in crore Taka
Particulars Residual maturity bucket
1-90 91-180 181-270 271-364
Days Days Days Days
Rate sensitive assets [A] 6,954.12 4,745.31 2,109.76 13,195.12
Rate sensitive liabilities [B] 9,987.82 3,100.96 2,289.40 7,553.83
GAP [A-B] (3,033.69) 1,644.35 (179.65) 5,641.29
Cumulative GAP (3,033.69) (1,389.35) (1,568.99) 4,072.30
Interest rate change (IRC) [Note 1] 0.0025 0.0025 0.0025 0.0025
Quarterly earnings impact [Cumulative GAP x IRC] (7.58) (3.47) (3.92) 10.18
Cumulative earnings impact (7.58) (11.06) (14.98) (4.80)
Note 1: Assuming 1% rise in interest rates for both asset and liability portfolio of the Bank.
7. Market Risk
a. Qualitative Disclosures:

i) Views of Board of The Board approves all policies related to market risk, set limits and
Directors (BOD) on trading / reviews compliance on a regular basis. The objective is to provide cost
investment activities effective funding to finance assets growth and trade related transactions.
The market risk covers the followings risks of the Bank’s balance sheet:

i) Interest rate risk;

ii) Equity price risk;
iii) Foreign exchange risk; and
iv) Commodity price risk

ii) Methods used to measure As per relevant Bangladesh Bank guidelines, Standardized Approach
Market risk has been used to measure the Market Risk for capital requirement for
trading book of the Bank. The total capital requirement in respect of
market risk is the aggregate capital requirement calculated for each of
the risk sub-categories. For each risk category minimum capital
requirement is measured in terms of two separately calculated capital
charges for “specific risk” and “general market risk” as under:

Component of Capital Charged for Market Risk

Market Risk
General Market Specific Market
Risk Risk
Interest Rate Risk Applied Applied
Equity Price Risk Applied Applied
Foreign Exchange Risk Applied
Commodities Price N/A
Risk
iii) Market Risk Management The Treasury Division of the Bank manages market risk covering
system liquidity, interest rate and foreign exchange risks with oversight from
Assets- Liability Management Committee (ALCO) comprising senior
executives of the Bank. ALCO is chaired by the Managing Director.
ALCO meets at least once in a month
 The Risk Management Division also reviews the market risk parameters
on monthly basis and recommends on portfolio concentration for
containing the RWA.
iv) Policies and processes for There are approved limits for credit deposit ratio, liquid assets to total
mitigating market risk assets ratio, maturity mismatch, commitments for both on-balance sheet
and off-balance sheet items and borrowing from money market and
foreign exchange position. The limits are monitored and enforced on a
regular basis to protect against market risks. The exchange rate
committee of the bank meets on a daily basis to review the prevailing
market condition, exchange rate, foreign exchange position, and
transactions to mitigate foreign exchange risks.

b. Quantitative Disclosure:
Amount in Crore
Particulars Solo Consolidated
The capital requirements for:
Interest Rate Risk 11.84 11.84
Equity Position risk 19.20 48.03
Foreign Exchange Risk 11.58 11.58
Commodity Risk - -
Total 42.62 71.45

8. Operational Risk

Operational risk is the risk of loss resulting from inadequate or failed internal process, people and systems
(for example failed IT system, or fraud perpetrated by OBL employee), or from external causes, whether
deliberate, accidental or natural. It is inherent in all of the Bank’s activities.

a. Qualitative Disclosure:

i) Views of Board of Directors The policy for operational risks including internal control and compliance risk
(BOD) on system to reduce is approved by the Board taking into account relevant guidelines of
Operational Risk Bangladesh Bank. Audit Committee of the Board directly oversees the
activities of Internal Control and Compliance Division (IC&CD) to protect
against operational risks.

As a part of continued surveillance, the Management Committee

(MANCOM), Risk Management Committee (at the management level),
independent Risk Management Division regularly reviews different aspects of
operational risk. The analytical assessment was reported to the Board / Risk
Management Committee /Audit Committee of the Bank for review and
formulating appropriate policies, tool & techniques for mitigation of
operational risk.
ii) Performance gap of OBL has a policy to provide competitive package and best working
executives and staffs environment to attract and retain the most talented people available in the
industry. OBL strong brand image plays an important role in employee
motivation. As a result, there is no significant performance gap.

iii) Potential external event Like other peers, OBL operates its business with few external risk factors
relating to the socio-economic condition, political atmosphere, regulatory
policy changes, natural disaster etc.
Considering the potential external risk, the bank invests heavily in IT
infrastructure for better automation and online transaction environment.

iv) Policies and processes for The policy for mitigating operational risks including internal control and
mitigating operational risk compliance risk is approved by the Board taking into account relevant
guidelines of Bangladesh Bank. A policy guideline on Risk Based Internal
Audit (RBIA) system is in operation.
Currently, OBL is using some models or tools for mitigating operational risk
such as Self Assessment of Anti-fraud Internal Control; Quarterly Operational
Report (QOR) and Departmental Control Function Check List in line with the
Bangladesh Bank’s relevant Instructions and recommendations. It is required
to submit the statement on Self Assessment of Anti-fraud Internal Control to
Bangladesh Bank on quarterly rest.

Bank’s Anti- Money laundering activities are headed by CAMELCO in the

rank of Senior Executive Vice President and their activities are devoted to
protect against all money laundering and terrorist finance related activities.
The newly established Central Customer Service & Complaint Management
Cell was also engaged in mitigating the operation risks of the Bank. Apart
from that, there is adequate check and balance at every stage of operation,
authorities are properly segregated and there is at least dual control on every
transaction to protect against operational risk.

b. Quantitative Disclosure:
Amount in Crore
Particulars Solo Consolidated
The capital requirements for: 234.79 236.67
Operational Risk

9. Liquidity Ratio:

Liquidity risk is the risk that a given security or asset cannot be traded quickly enough in the market to
prevent a loss (or make the required profit) or when a bank is unable to fulfill its commitments in time
when payment falls due. Thus, liquidity risk can be of two types:

a. Qualitative Disclosure:

i) Views of Board of Directors OBL has adopted the Basel III framework on liquidity
on system to reduce Liquidity Risk standards as prescribed by Bangladesh Bank (BB) and has
put in place requisite systems and processes to enable
periodical computation and reporting of the Liquidity
Coverage Ratio (LCR) & Net Stable Funding Ratio (NSFR).
 The mandated regulatory threshold as per the transition plan
is embedded into the Risk Appetite Statement of the Bank
thus subjecting LCR & NSFR maintenance to Board
oversight and periodical review. The Treasury Department
computes the LCR & NSFR and reports the same to the
Asset Liability Management Committee (ALCO) every
month for review where ALCO is chaired by the Managing
Director as well as to the Risk Management Committee
(Management Level). The Risk Management Committee of
the board sits quarterly to discuss the overall risk scenario of
the bank. The Bank has been submitting LCR reports
monthly & NSFR quarterly to BB as per prescribed
guideline.
ii) Methods used to measure Liquidity The following methods are used to measure Liquidity risk-
risk  Liquidity Coverage Ratio (LCR)
 Net Stable Funding Ratio (NSFR)
 Cash Reserve Ratio (CRR),
 Statutory Liquidity Ratio (SLR)
 Maximum Cumulative Outflow (MCO)
 Advance Deposit Ratio (ADR)
iii) Liquidity risk Management The Treasury Division of the Bank manages liquidity risk
system with oversight from Assets- Liability Management
Committee (ALCO) comprising senior executives of the
Bank. ALCO meets once in a month to review strategies on
Asset Liability Management.

Liquidity Risk is measured using flow approach and stock

approach. Flow approach involves comprehensive tracking
of cash flow mismatches. Stock approach involves
measurement of critical ratios in respect of liquidity risk.
Analysis of liquidity risk also involves examining how
funding requirements are likely to be affected under crisis
scenarios. The Bank has a Board approved contingency
action plan to manage stressed liquidity guided by the
regulatory instructions. The Bank has an extensive intraday
liquidity risk management framework for monitoring
intraday positions during the day.
iv) Policies and processes for mitigating The Liquidity risk management of the Bank is undertaken by
Liquidity risk the Asset Liability Management group in the Treasury in
accordance with the Board approved policies and ALCO
approved funding plans. The Risk & Treasury department
measures and monitors the liquidity profile of the Bank with
reference to the Board approved limits, on a static as well as
on a dynamic basis by using the gap analysis technique
supplemented by monitoring of key liquidity ratios and
periodical liquidity stress testing.
 b. Quantitative Disclosure:
Particulars Amount in crore Taka
Liquidity Coverage Ratio (LCR) 149.91%
Net Stable Funding Ratio (NSFR) 115.04%
Stock of High Quality Liquid Assets 4,901.56
Total Net cash Outflows over the next 30 Calendar days 3,269.71
Available amount of stable funding 23,795.49
Required amount of stable funding 20,683.89

10. Leverage Ratio:

In order to avoid building-up excessive on- and off-balance sheet leverage in the banking system, a simple,
transparent, non-risk based leverage ratio has been introduced by Bangladesh Bank. The leverage ratio is
calibrated to act as a credible supplementary measure to the risk based capital requirements. The leverage
ratio is intended to achieve the following objectives:

a) constrain the build-up of leverage in the banking sector which can damage the broader financial
system and the economy; and
b) Reinforce the risk based requirements with an easy to understand and a non-risk based measure.

a. Qualitative Disclosure:

1. In line with the BASEL III guidelines, OBL Board of Directors emphasis to improve Leverage Ratio by
enhancing Tier 1 capital either plausible dividend policy or enhancing profitability.

2. Leverage ratio is calculated dividing the Tier 1 Capital by the total Exposure. Tier 1 Capital is calculated
as per BASEL III guidelines. In the case of exposure measure, OBL includes both on balance sheet
exposure and off balance sheet exposure. Here, On Balance Sheet exposure is ascertained taking into
consideration of accounting balance sheet netting of specific provision and off balance sheet exposure is
ascertained applying 100% credit conversion factor.

b. Quantitative Disclosure:
Amount in crore Taka
Particulars Solo Consolidated
Leverage Ratio 6.52% 6.58%
Adjusted Tier 1 Capital 2,062.82 2,083.00
On balance sheet exposure 30,193.66 30,220.59
Off balance sheet exposure 1,447.53 1,447.53
Deductions (9.08) (16.13)
Total exposure 31,632.11 31,651.99
11. Remuneration
a) Qualitative Disclosure:
a) Information relating to the bodies The OBL Remuneration Committee i.e. the Management is
that oversee remuneration and responsible for overseeing, review and implementation of Bank’s
mandate of the Management. overall compensation structure and related policies regarding
remuneration packages for all / specialized employees and the
Directors/MD/any other Bank appointed/engaged
person(s)/Material Risk Takers of the Bank. They also oversee
performance linked incentives, perquisites, other financial options
etc. with a view to attract, motivate and retain talents and review
compensation packages/pay structure in comparison to that of
other Banks and the industry in general to maintain its
competitive edge.
The Management works in close coordination with the Risk
Management Committee of the Bank, in order to achieve effective
alignment between remuneration and risks. The Management also
ensures that the cost/income ratio of the Bank supports the
remuneration package consistent with maintenance of sound
capital adequacy ratio. In addition, the Management of OBL
performs the following:
- Conduct the annual review of the Compensation Policy.
- Fulfill such other powers and duties as may be delegated
to it by the Board.
Till date, the Bank has not yet engaged any External Consultants
for conducting such exercise since those were done by the Bank’s
Management.
OBL Remuneration Policy covers the principles and rules
regarding remuneration being paid/to be paid to Directors and all
employees of the Bank including the Management, its review,
market intelligence, analysis and proposals for modification
commensurate with changed situations in compliance with
relevant laws and rules & regulations.
An employee is considered a Material Risk Taker if he/she is
the Head of a significant business line, or any individuals within
their control who have a material impact on the Bank’s risk
profile.
The prevailing policies regarding remuneration and other
financial/non financial benefits of employees have been
implemented with the approval of the Board of Directors.
b) Information relating to the design and The substantive pay and other allowances including perquisites,
structure of remuneration processes where applicable, to the employees including all subordinates,
and the key features and objectives of officers and executives up to the rank of SEVP are
remuneration policy designed/structured in line with the competitive remuneration
structure prevailing in the industry. In respect of executives above
the rank of SEVP i.e. ADMD, DMD & MD, the individual
remuneration is fixed by the Board of Directors. Pay Structure
and perquisites payable to the employees have been approved by
the Board of Directors of the Bank. While determining the
remuneration package, the Management and the Board take into
consideration the following factors.
1. Minimum Qualification required
 2. Experience
3. Level of Risk involved
4. Criticality of the job
5. Creativity required in the job
6. Salesmanship
7. Leadership
8. Corporate Rank etc.
The remuneration structure for the Managing Director (MD) of
the Bank is subject to approval of the Central Bank i.e.
Bangladesh Bank.
Review of the remuneration policy was not required during the
year 2021 since the Bank’s overall remuneration structure has
remained competitive.
c) Description of the ways in which The Management time to time reviews the remuneration
current and future risks are taken into package/structure of the key employees/positions who are
account in the remuneration involved in the functions that deal with the risk factors (both
processes. It should include the nature current and future positions).
and type of the key measures used to Though risk is prevalent in all the functions of a commercial
take account of these risks. bank, the functions that mainly deal with the risk factors of the
Bank include:
- Marketing
- CRM
- Operations
- Trade Finance etc.
The Board of Directors through the Management exercises
oversight and effective governance over the framing and
implementation of the remuneration policy. Human Resource
Management under the guidance of MD administers the
compensation and Benefit structure in line with the best suited
practices and statutory requirements as applicable.
d) A discussion of the bank's policy on The Bank has various schemes in regards to deferred and vested
deferral and vesting of variable variable remuneration which are as under:
remuneration and a discussion of the - PF (Vesting or entitlement to employer’s contribution
bank's policy and criteria for happens on completion of 03 (three) years of regular
adjusting deferred remuneration service and the Bank contributes equal amount of
before vesting and after vesting. contribution as contributed by the employee) @ 10% of
substantive pay.
- Gratuity (Vesting or entitlement to employer’s
contribution happens on completion of 05 (five) years of
regular service in the Bank) @ one substantive pay for
each completed year of service and for the fraction of 6
months and above.
- Death cum Survival Superannuation Fund provides
superannuation and other benefits to the employees of the
Bank on their death, disability, retirement/or being
incapacitated at any time or for any other cause that may
be deemed fit as per Board’s approved policy.
- Furniture & Fixture allowances (the executives of the
Bank are entitled to a rank-wise specific amount to meet
the cost of furnishing of residence with furniture and
fixture). The amount is amortized in 05 years of
continuous service of the respective employee.
 - Staff House Building Loan (a permanent employee in the
rank of Principal Officer or above, after completion of 5
(five) years of service, can avail of a House Building Loan
at Bank Rate as per policy and approval from the
appropriate Authority).
The Board may adopt principles for mauls / claw back before or
after vesting, if such situation arises and the law(s) of the country
permits the same.
e) Description of the different forms of Variable pay means the compensation as fixed by the Board on
variable remuneration (i.e. cash, recommendation of the Management, which is based on the
shares, and share-linked instruments performance appraisal of an employee in that role, that is, how
and other forms) that the bank utilizes well they accomplish their goals. It may be paid as:
and the rationale for using these  Performance Linked Incentives to those employees who
different forms. are eligible for incentives.
 Ex-gratia for other employees who are not eligible for
Performance linked Incentives.
 Different awards based on extra-ordinary performance &
achievement.
 Employee/Manager of the Month/Quarter award.
 Reimbursement/award for brilliant academic/professional
achievement.
 Leave Fare Assistance (LFA)
b) Quantitative Disclosure:
(a) Number of employees having received a variable No employee received the variable
remuneration award during the financial year. remunerations during the year 2021.
Number and total amount of guaranteed bonuses awarded 2 (two) number of guaranteed bonus
during financial year. (Festival Bonus) were awarded during the
year and the amount of bonus was Tk. 21.53
crore.
(b) Total amount of outstanding deferred remuneration, split Total amount of outstanding deferred
into cash, share and share-linked instruments and other remunerations (i.e., Gratuity) is Tk. 123.65
forms. crore as of 31st December, 2021.
Total Amount of deferred remuneration paid out in the Total amount of deferred remunerations
financial year. paid is Tk. 7.18 crore during the year 2021
(Gratuity amount paid to the outgoing
employees during the year 2021).
(c) Breakdown of amount of remuneration awards for the
financial year to show:
- Fixed and variable Fixed remuneration is Tk. 268.52 crore and
variable remuneration disbursed is Nil
- Deferred and no-deferred Deferred remuneration awarded (account for
during the year) is Tk. 24.02 crore and non-
deferred remuneration is Tk. 244.50 crore.
- Different forms used (cash, shares and share linked N/A
instruments, other forms).
(d) Quantitative information about employees’ exposure to implicit N/A
(e.g. fluctuations in the value of shares or performance units)
and explicit adjustments (e.g. claw backs or similar reversals or
downward revaluations of awards) of deferred remuneration and
retained remuneration: