The state-owned banks are especially vulnerable to shocks, as both asset quality
and governance are weak. The gross non-performing loans ratio of the sector
increased to 10.5% in 1Q of calendar year 2014 from 8.9% in 4Q13, while the ratio
for state-owned banks only was 21.9% in 1Q14. Bangladesh Bank seems committed
to strengthening the poor governance in the banking sector, but has indicated it
would need more extensive powers to do so. Fitch expects the state-owned banks
would need additional capital in the medium term, which would imply crystallisation
of contingent liabilities for the sovereign. Substantial strengthening of the balance
sheets and governance in the banking sector would be credit positive, while greaterthan-expected deterioration in the banking sectors asset quality, prompting
substantial government support, would be credit negative. [Source: Fitch Rating
Agency]
Political Risk:
Violence in the run-up to the parliamentary elections in January 2014 had a
moderately negative impact on economic growth, but did not paralyse the economy.
This most recent episode in Bangladeshs political history highlights prolonged high
political risk levels. Continued political polarisation and uncertainty may impact
economic activity through long-term investment decisions. Reduction of political
risk, for instance through reduced polarisation between the main political parties,
would make future disruptions of economic activity less likely. Protracted substantial
disruption of economic activity as a result of materialising political risk would be
credit negative. [Source: Fitch Rating Agency]
Currency Risk:
Foreign Currency
LongTerm IDR
BB
ShortTerm IDR
Local Currency
LongTerm IDR
BB
External Debt
The outstanding domestic debt as percentage of GDP was 17.46 percent, whereas
the outstanding external debt was 18 percent in FY 2012-13. Government borrowed
more from non banking system than the banking system in FY 2013-14.
14, whereas it was USD 22085.5 million, USD 22095.2 million and USD 22981.4
million in FY 2010-11, FY 2011-12 and FY 2012-13 respectively.
Exchange Rate