Chapter-1: Introduction

1.1 Origin of the Report

The report is prepared to fulfill the requirement of the course Financial Derivatives (F-503). This
following report has been assigned to us by our course teacher, Professor Mahmood Osman Imam.
The report reflects about our depth understanding about the different derivative instruments. We
worked on IFIC Bank Ltd. based on the data of the five years.

1.2 Objectives
The main objectives of this report are:

 To gather conceptual and practical knowledge broadly about the capital market an
economy.
 To know how financial institutions in Bangladesh are performing in Bangladesh.
 To learn about the risk the financial institutions are exposed to
 To gain knowledge about stress testing and how they are exposed to different types of
shocks.

1.3 Methodology
This report has been completed by taking information from primary and secondary sources. We
have completed our report by taking information from five years annual report of IFIC Bank
Limited. We have also taken information from different websites.

1.4 Limitation
While preparing this report, we faced some limitations in terms of having poor knowledge and
understanding about the risk exposures of bank. Lack of detailed information was also a
limitation. In that case, we used some assumptions to facilitate our calculation and analysis.
Although we had this limitation, however we have tried our level best to fulfill the objectives of
this report properly.

1
 Chapter-2: Company Profile: IFIC Bank Limited
2.1. Company Profile

International Finance Investment and Commerce Bank Limited (IFIC Bank) is banking company
incorporated in the People’s Republic of Bangladesh with limited liability. It was set up at the
instance of the Government in 1976 as a joint venture between the Government of Bangladesh
and sponsors in the private sector with the objective of working as a finance company within the
country and setting up joint venture banks/financial institutions aboard. In 1983 when the
Government allowed banks in the private sector, IFIC was converted into a full fledged
commercial bank. The Government of the People’s Republic of Bangladesh now holds 32.75%
of the share capital of the Bank. Directors and Sponsors having vast experience in the field of
trade and commerce own 11.31% of the share capital and the rest is held by the general public.

2.2. Mission

 The Mission of the bank is to provide service to our clients with the help of a skilled and
dedicated workforce whose creative talents, innovative actions and competitive edge
make our position unique in giving quality service to all institutions and individuals that
we care for.
 They are committed to the welfare and economic prosperity of the people and the
community, for they derive from them our inspiration and drive for onward progress to
prosperity.
 They want to be the leader among banks in Bangladesh and make our indelible mark as
an active partner in regional banking operating beyond the national boundary.
 In an intensely competitive and complex financial and business environment, they
particularly focus on growth and profitability of all concerned.

2.2. Vision

 At IFIC, we want to be the preferred financial service provider through innovative,

sustainable and inclusive growth and deliver the best in class value to all stakeholders.

2
 Chapter-3: Stress Testing

3.1. What is stress testing?

Stress testing is a simulation technique, which are used to determine the reactions of different
financial institutions under a set of exceptional, but plausible assumptions through a series of
battery of tests. At institutional level, stress testing techniques provide a way to quantify the
impact of changes in a number of risk factors on the assets and liabilities portfolio of the
institution. For instance, a portfolio stress test makes a rough estimate of the value of portfolio
using a set of exceptional but plausible events in abnormal markets. However, one of the
limitations of this technique is that stress tests do not account for the probability of occurrence of
these exceptional events. For this purpose, other techniques, for example VAR (value at risks)
models etc, are used to supplement the stress tests. These tests help in managing risk within a
financial institution to ensure optimum allocation of capital across its risk profile.

At the system level, stress tests are primarily designed to quantify the impact of possible changes
in economic environment on the financial system. The system level stress tests also complement
the institutional level stress testing by providing information about the sensitivity of the overall
financial system to a number of risk factors. These tests help the regulators to identify structural
vulnerabilities and the overall risk exposure that could cause disruption of financial markets. Its
prominence is on potential externalities and market failures.

3.2. Techniques for Stress Testing

a) Simple Sensitivity Analysis (single factor tests) measures the change in the value of
portfolio for shocks of various degrees to different independent risk factors while the underlying
relationships among the risk factors are not considered. For example, the shock might be the
adverse movement of interest rate by 100 basis points and 200 basis points. Its impact will be
measured only on the dependent variable i.e. capital in this case, while the impact of this change
in interest rate on NPLs or exchange rate or any other risk factor is not considered.
b) Scenario Analysis encompasses the situation where a change in one risk factor affects a
number of other risk factors or there is a simultaneous move in a group of risk factors. Scenarios
can be designed to encompass both movements in a group of risk factors and the changes in the

3
underlying relationships between these variables (for example correlations and volatilities).
Stress testing can be based on the historical scenarios, a backward looking approach, or the
hypothetical scenario, a forward‐looking approach.
c) Extreme Value/ Maximum Shock Scenario measures the change in the risk factor in the
worst‐case scenario, i.e. the level of shock which entirely wipes out the capital.

3.3. Scope of Stress Test

As a starting point the scope of the stress test is limited to simple sensitivity analysis. Five
different risk factors namely; interest rate, forced sale value of collateral, non‐performing loans
(NPLs), stock prices and foreign exchange rate have been identified and used for the stress
testing. Moreover, the liquidity position of the institutions has also been stressed separately.
Though the decision of creating different scenarios for stress testing is a difficult one, however,
to start with, certain levels of shocks to the individual risk components have been specified
considering the historical as well as hypothetical movement in the risk factors.
Stress test shall be carried out assuming three different hypothetical scenarios:
 Minor Level Shocks: These represent small shocks to the risk factors. The level for
different risk factors can, however, vary.
 Moderate Level Shocks: It envisages medium level of shocks and the level is defined in
each risk factor separately.
 Major Level Shocks: It involves big shocks to all the risk factors and is also defined
separately for each risk factor.
 Assumptions behind each Scenario: The stress test at this stage is only a single factor
sensitivity analysis. Each of the five risk factors has been given shocks of three different
levels. The magnitude of shock has been defined separately for each risk factor for all the
three levels of shocks.

4
 Chapter-4: Stress Testing of IFIC Bank Limited
4.1. Capital Adequacy Ratio

The regulatory capital, risk weighted assets and CAR of IFIC Bank form the year 2013 to 2017 is
given below-

Calibration in CAR 2013 2014 2015 2016 2017

Regulatory capital 9,630,845,995 11,308,447,905 11,813,000,000 16,927,000,000 24,114,000,000
RWA (Risk Weighted
92,915,360,000 111,573,690,000 117,314,000,000 150,523,000,000 191,773,000,000
Assets)
CAR (Capital
10.37% 10.14% 10.07% 11.25% 12.57%
Adequacy ratio)

4.2. Interest Rate Shock

Interest rate risk is the potential that the value of the on‐balance sheet and the offbalance sheet
positions of the bank/DFI would be negatively affected with the change in the interest rates. The
vulnerability of an institution towards the adverse movements of the interest rate can be gauged
by using duration GAP analysis.

4.2.1. Calculation of Duration

Duration is the measure of a portfolio’s price sensitivity to changes in interest rates. Longer the
duration, larger the changes in the price for a given change in the interest rates. Larger the
coupon, lower would be the duration and smaller would be the change in the price for a given
change in the interest rates.
The estimated duration for assets and liabilities and calculation of IFIC Bank Limited for the
year 2013 to 2016 is given below-

Particulars 2013 2014 2015 2016 2017

Duration of Assets 1.55 1.61 1.80 2.01 1.95
Duration of Liabilities 1.49 1.74 2.02 2.56 1.49
DGAP 0.17 -0.01 -0.08 -0.38 0.68

5
 Here, the duration of the assets and liabilities of IFIC Bank Limited for the year of 2013-2017,
shows vulnerable results. In the year 2013, the duration of assets was higher than the duration of
liabilities, but in the consecutive three years, the duration of liabilities were higher than the
duration of assets causing negative duration gaps. Again, the duration of the assets increased in
2017 which resulted in a positive duration gap.
4.2.2. Interest Rate Shock

The impact of interest rate shock on the CAR of IFIC Bank Limited for the year 2017 is shown
on the table below:
Year 2017

Change in MV of the equity Minor Moderate Major

Duration of Assets 1.95 1.95 1.95

Duration of Liabilities 1.49 1.49 1.49

Market Value of Assets 245,710,323,288 245,710,323,288 245,710,323,288

Market value of liabilities 209,544,409,522 209,544,409,522 209,544,409,522

Duration GAP (DGAP) 0.68 0.68 0.68

(-DGAP) -0.68 -0.68 -0.68

Change in interest rate -1% -2% -3%

YTM (assets) 5.32% 5.32% 5.32%

Market value of total assets 245,710,323,288 245,710,323,288 245,710,323,288

Change in MVE
1,577,692,894 3,155,385,788 4,733,078,682
Magnitude of Shock -1% -2% -3%

3,155,385,788
Fall in MVE 1,577,692,894 4,733,078,682

Tax adjusted loss 946,615,736 1,893,231,473 2,839,847,209

Revised Regulatory capital 25,060,615,736 26,007,231,473 26,953,847,209

Revised RWA 192,719,615,736 193,666,231,473 194,612,847,209

Revised CAR 13.00% 13.43% 13.85%

6
Fall in CAR -0.43% -0.85% -1.28%

The summary of the impact of interest rate shock on the CARof IFIC Bank Limited is presented
below:
Interest Rate Shock
Year Particulars Minor Moderate Major
Original CAR 10.37% 10.37% 10.37%
2013 Revised CAR 10.48% 8.83% 8.49%
Fall in CAR -0.12% 1.54% 1.87%
Original CAR 10.14% 10.14% 10.14%
2014 Revised CAR 10.13% 10.12% 10.12%
Fall in CAR 0.01% 0.01% 0.02%
Original CAR 10.07% 10.07% 10.07%
2015 Revised CAR 10.01% 9.96% 9.90%
Fall in CAR 0.12% 0.18% 0.24%
Original CAR 11.25% 11.25% 11.25%
2016 Revised CAR 11.00% 10.74% 10.49%
Fall in CAR 0.25% 0.50% 0.75%
Original CAR 12.57% 12.57% 12.57%
2017 Revised CAR 13.00% 13.43% 13.85%
Fall in CAR -0.43% -0.85% -1.28%

A graph showing original and revised CAR under different scenario for the year 2013 to 2017 is
given below-

7
 Original and Revised CAR

14.00%
12.00%
10.00%
8.00%
6.00%
4.00% Original CAR

2.00% Revised CAR

0.00%

Major
Major

Major

Major

Major
Moderate

Moderate

Moderate

Moderate

Moderate
Minor

Minor

Minor

Minor

Minor
2013 2014 2015 2016 2017

Here, it can be seen that, throughout the years from 2012 to 2016, the revised CAR fall when
different shocks are applied to a small extent, though in 2013, the revised CAR decreased greater
compared to the original CAR when the major shock is applied. But in 2017, it is showing an
opposite result. Though different ranges of shocks are applied, the revised CARs are still higher
than the original CAR for three scenarios.

4.3 Credit Risk

The stress test for credit risk assesses the impact of increase in the level of nonperforming loans
of the bank/FI. This involves six types of shocks:
(1) Increase In The NPLs
The first deals with the increase in the NPLs and the respective provisioning. The three scenarios
shall explain the impact of 1%, 2% and 3% of the total performing loans directly downgraded to
bad/loss category having 100% provisioning requirement.
The impact of increase in the NPLs on the CAR of IFIC Bank Limited for the year 2017 is
shown on the table below:
1. Credit risk- Increase in NPLs: 2017
Magnitude of shock 1% 2% 3%

Total loan 179,264,206,747 179,264,206,747 179,264,206,747

Total performing loan 167,786,327,080 167,786,327,080 167,786,327,080

8
Total NPLs 11,477,879,667 11,477,879,667 11,477,879,667

NPLs to Loans (%) 6.40% 6.40% 6.40%

Increase in provisions (after adj. of eli.

Sec. if any) 1,677,863,270.80 3,355,726,541.60 5,033,589,812.40

Tax adjusted provison (not yet app.) 1,677,863,270.80 3,355,726,541.60 5,033,589,812.40

Revised capital 22,436,136,729.20 20,758,273,458.40 19,080,410,187.60

Revised risk weighted assets 190,095,136,729.20 188,417,273,458.40 186,739,410,187.60

Revised CAR (%) 11.80% 11.02% 10.22%

Revised NPLs 13,155,742,937.80 14,833,606,208.60 16,511,469,479.40

Revised NPLs to loans (%) 7.34% 8.27% 9.21%

Fall in CAR 0.772% 1.557% 2.357%

The summary of the impact of increase in the NPLs on the CAR of IFIC Bank Limited is
presented below:
Increase In The NPLs
Year Particulars Minor Moderate Major
Revised NPLs to loans (%) 4.73% 5.69% 6.65%
Original CAR 10.37% 10.37% 10.37%
2013
Revised CAR 9.58% 8.78% 7.96%
Fall in CAR 0.788% 1.589% 2.405%
Revised NPLs to loans (%) 5.90% 6.85% 7.80%
Original CAR 10.14% 10.14% 10.14%
2014
Revised CAR 9.35% 8.54% 7.72%
Fall in CAR 0.790% 1.594% 2.412%
Revised NPLs to loans (%) 7.39% 8.33% 9.27%
2015 Original CAR 10.07% 10.07% 10.07%
Revised CAR 9.18% 8.27% 7.34%

9
 Fall in CAR 0.893% 1.803% 2.732%
Revised NPLs to loans (%) 6.24% 7.18% 8.13%
Original CAR 11.25% 11.25% 11.25%
2016
Revised CAR 10.47% 9.69% 8.89%
Fall in CAR 0.772% 1.558% 2.358%
Revised NPLs to loans (%) 7.34% 8.27% 9.21%
Original CAR 12.57% 12.57% 12.57%
2017
Revised CAR 11.80% 11.02% 10.22%
Fall in CAR 0.772% 1.557% 2.357%

A graph showing original and revised CAR under different scenario for the year 2013 to 2017 is
given below-

Original CAR and Revised CAR

14.00%
12.00%
10.00%
8.00%
6.00%
4.00% Original CAR

2.00% Revised CAR

0.00%
Major
Major

Major

Major

Major
Moderate

Moderate

Moderate

Moderate

Moderate
Minor

Minor

Minor

Minor

Minor

2013 2014 2015 2016 2017

Here, it can be seen that, throughout the years, after the performing loan downgraded to non-
performing loans, revised NPL to loans respectively, after applying 1%, 2%, and 3% shock. The
graph is showing that, the revised CAR is lower than the original CAR to a greater extent.

(2) Shift in the NPLs Categories

The second deals with the negative shift in the NPLs categories and hence the increase in
respective provisioning. The three scenarios shall explain the impact of 50%, 80% and 100%
downward shift in the NPLs categories. For example, for the first level of shock 50% of the

10
 SMA shall be categorized under substandard, 50% of the substandard shall be categorized under
doubtful and 50% of the doubtful shall be added to the bad/loss category.
The impact of negative shift in the NPLs on the CAR of IFIC Bank Limited for the year 2017 is
shown on the table below:
2. Credit risk - Downward shift in NPL's
2017
categories
Magnitude of shock 50% 80% 100%
1,565,969,100 1,565,969,100 1,565,969,100
Standard
112,353,204 112,353,204 112,353,204
SMA
256,525,291 256,525,291 256,525,291
Substandard
112,366,970 112,366,970 112,366,970
Doubtful
3,224,075,507 3,224,075,507 3,224,075,507
Bad & loss
0% 0% 0%
Provision for Standard
0% 0% 0%
Provision for SMA
20% 20% 20%
Provision for Substandard
50% 50% 50%
Provision for Doubtful
100% 100% 100%
Provision for Bad & loss
3,331,564,050.20 3,331,564,050.20 3,331,564,050.20
Weighted amount of provision
3,383,717,377.75 3,445,792,409.08 3,487,175,763.30
Provison after shift in categories
52,153,327.55 114,228,358.88 155,611,713.10
Increase in provision
52,153,327.55 114,228,358.88 155,611,713.10
Tax adjusted provision
24,061,846,672.45 23,999,771,641.12 23,958,388,286.90
Revised capital
191,720,846,672.45 191,658,771,641.12 191,617,388,286.90
Revised RWA
12.55% 12.52% 12.50%
Revised CAR (%)
0.02% 0.05% 0.07%
Fall in CAR

11
 The summary of the impact of negative shift in the NPLs on the CAR of IFIC Bank Limited is
presented below:
Shift in the NPLs Categories
Year Particulars 50% 80% 100%
Original CAR 10.37% 10.37% 10.37%
2013 Revised CAR 10.35% 10.33% 10.32%
Fall in CAR 0.02% 0.03% 0.04%
Original CAR 10.14% 10.14% 10.14%
2014 Revised CAR 10.10% 10.07% 10.05%
Fall in CAR 0.04% 0.06% 0.08%
Original CAR 10.07% 10.07% 10.07%
2015 Revised CAR 9.99% 9.94% 9.90%
Fall in CAR 0.08% 0.13% 0.17%
Original CAR 11.25% 11.25% 11.25%
2016 Revised CAR 11.22% 11.19% 11.17%
Fall in CAR 0.03% 0.05% 0.07%
Original CAR 12.57% 12.57% 12.57%
2017 Revised CAR 12.55% 12.52% 12.50%
Fall in CAR 0.02% 0.05% 0.07%

A graph showing original and revised CAR under different scenario for the year 2013 to 2017 is
given below-

12
 Original and Revised CAR

14.00%
12.00%
10.00%
8.00%
6.00%
4.00% Original CAR

2.00% Revised CAR (%)

0.00%
Major
Major

Major

Major

Major
Moderate

Moderate

Moderate

Moderate

Moderate
Minor
Minor

Minor

Minor

Minor
2013 2014 2015 2016 2017

The downgrading of NPL categories doesn’t affect much the CAR of the Bank in different years.
In 2017, due to a downward shift of 50% of NPL category, the CAR fell by 0.02% which were
0.03%, 0.08%, 0.04%and 0.02% in previous years. In case of 80% and 100% shift in the
categories, the impacts are greater than the 50% shift, but not significant to make huge changes
in the CAR and this is also applicable for 100% shift.
(3) Fall in The Forced Sale Value (FSV) of Mortgaged Collateral

The third deals with the fall in the forced sale value (FSV) of mortgaged collateral. The forced
sale values of the collateral shall be given shocks of 10%, 20% and 40% decline in the forced
sale value of mortgaged collateral for all the three scenarios respectively.
The impact of fall in the forced sale value (FSV) of mortgaged collateral on the CAR of IFIC
Bank Limited for the year 2017 is shown on the table below:
3. Credit risk- fall in the FSV of
2017
Mortgaged Collateral
Magnitude of shock 10% 20% 40%
7,884,911,899 7,884,911,899 7,884,911,899
Total FSV
Weighted forced sale value of 5,612,904,443 5,612,904,443 5,612,904,443
collateral
Fall in FSV 561,290,444 1,122,580,889 2,245,161,777

Tax adjusted provison 561,290,444 1,122,580,889 2,245,161,777

Revised capital 23,552,709,556 22,991,419,111 21,868,838,223

13
Revised RWA 191,211,709,556 190,650,419,111 189,527,838,223

Revised CAR (%) 12.32% 12.06% 11.54%

Fall in CAR 0.26% 0.51% 1.04%

The summary of the impact of fall in the forced sale value (FSV) of mortgaged collateral on the
CAR of IFIC Bank Limited is presented below:
Credit risk- fall in the FSV of Mortgaged Collateral
Year Particulars 10% 20% 40%
Original CAR 10.37% 10.37% 10.37%
2013 Revised CAR 10.23% 10.10% 9.82%
Fall in CAR 0.13% 0.27% 0.54%
Original CAR 10.14% 10.14% 10.14%
2014 Revised CAR 9.94% 9.75% 9.36%
Fall in CAR 0.19% 0.39% 0.78%
Original CAR 10.07% 10.07% 10.07%
2015 Revised CAR 9.77% 9.47% 8.86%
Fall in CAR 0.30% 0.60% 1.21%
Original CAR 11.25% 11.25% 11.25%
2016 Revised CAR 11.04% 10.84% 10.42%
Fall in CAR 0.20% 0.41% 0.82%
Original CAR 12.57% 12.57% 12.57%
2017 Revised CAR 12.32% 12.06% 11.54%
Fall in CAR 0.26% 0.51% 1.04%

A graph showing original and revised CAR under different scenario for the year 2013 to 2017 is
given below-

14
 Original and Revised CAR
14.00%
12.00%
10.00%
8.00%
6.00%
4.00% Original CAR
2.00% Revised CAR (%)
0.00%
Major

Major

Major

Major

Major
Moderate

Moderate

Moderate

Moderate

Moderate
Minor

Minor

Minor

Minor

Minor
2013 2014 2015 2016 2017

The fall in the forced sale value (FSV) of mortgaged collateral doesn’t affect much the CAR of
the Bank in different years, though there is a greater extent of change in 2017 for 40% shock. In
2017, due to a downward shift of 10% of forced sale value (FSV) of mortgaged collateral, the
CAR fell by 0.26% which were 0.20%, 0.30%, 0.19% and 0.13%in previous years. In case of
80% and 100% shift in the categories, the impacts are greater than the 50% shift, but not
significant to make huge changes in the CAR and this is also applicable for 100% shift.

(4) Increase of the NPLs in Particular 1 Or 2 Sectors

The fourth deals with the increase of the NPLs in particular 1 or 2 sectors and the respective
provisioning. The three scenarios shall explain the impact of 5%, 7.5% and 10% performing
loans of particular 1 or 2 sectors directly downgraded to bad/loss category having 100%
provisioning requirement.
The impact of the increase of the NPLs in particular 1 or 2 sectors on the CAR of IFIC Bank
Limited for the year 2017 is shown on the table below:
4. Credit risk- Increase in NPL's under
2017
B/L category in 1 or 2 sectors
Magnitude of shock 5.00% 7.50% 10.00%
Loan to Trade & commerce 25,189,491,153 25,189,491,153 25,189,491,153

1,259,474,558 1,889,211,836 2,518,949,115

Increase in NPls
Increase in provision (after adjustement of 1,259,474,558 1,889,211,836 2,518,949,115
value of eligible securities if any)

15
Tax adjusted provison 1,259,474,558 1,889,211,836 2,518,949,115

Revised capital 22,854,525,442 22,224,788,164 21,595,050,885

Revised RWA 190,513,525,442 189,883,788,164 189,254,050,885

12.00% 11.70% 11.41%

Revised CAR (%)

Fall in CAR 0.58% 0.87% 1.16%

The summary of the impact of increase of the NPLs in particular 1 or 2 sectors on the CAR of
IFIC Bank Limited is presented below:
Credit risk- Increase in NPL's under B/L category in 1 or 2 sectors
Year Particulars 5.00% 7.50% 10.00%
Original CAR 10.37% 10.37% 10.37%
2013 Revised CAR 9.33% 8.81% 8.27%
Fall in CAR 1.03% 1.56% 2.09%
Original CAR 10.14% 10.14% 10.14%
2014 Revised CAR 9.20% 8.73% 8.25%
Fall in CAR 0.93% 1.41% 1.89%
Original CAR 10.07% 10.07% 10.07%
2015 Revised CAR 9.05% 8.53% 8.01%
Fall in CAR 1.02% 1.54% 2.06%
Original CAR 11.25% 11.25% 11.25%
2016 Revised CAR 10.51% 10.14% 9.77%
Fall in CAR 0.73% 1.10% 1.47%
Original CAR 12.57% 12.57% 12.57%
2017 Revised CAR 12.00% 11.70% 11.41%
Fall in CAR 0.58% 0.87% 1.16%

A graph showing original and revised CAR under different scenario for the year 2013 to 2017 is
given below-

16
 Original and Revised CAR

14.00%
12.00%
10.00%
8.00%
6.00%
4.00% Original CAR
2.00% Revised CAR (%)
0.00%

Major
Major

Major

Major

Major
Moderate

Moderate

Moderate

Moderate

Moderate
Minor

Minor

Minor

Minor

Minor
2013 2014 2015 2016 2017

This shock has a significant effect on CAR. After applying minor, moderate and major type
shocks, significant changes in the CAR were observed throughout the year. The CAR fell by
0.58%, 0.87% and 1.16% in 2017 after applying three level shocks. In other years, the shocks
have greater impact on the CARs.
(5) Increase of the NPLs due to Default of Top 10 Large Borrowers

The fifth deals with the increase of the NPLs due to default of Top 10 large borrowers and the
respective provisioning. The three scenarios shall explain the impact of 5%, 7.5% and 10%
performing loans of Top 10 large borrowers directly downgraded to bad/loss category having
100% provisioning requirement.
The impact of the increase of the NPLs due to default of Top 10 large borrowers on the CAR of
IFIC Bank Limited for the year 2017 is shown on the table below:

5. Credit risk - increase in NPL's due to

2017
Top 10 large loan borrowers
Magnitude of shock 5.00% 7.50% 10.00%

Total loan to top 10 large borrowers 33,092,033,333 33,092,033,333 33,092,033,333

1,654,601,667 2,481,902,500 3,309,203,333

Increase in NPLs under B/L category
Increase in provisions (after adjustment of 1,654,601,667 2,481,902,500 3,309,203,333
value of eligible securities if any)

17
 Tax adjusted provision 1,654,601,667 2,481,902,500 3,309,203,333

Revised capital 22,459,398,333 21,632,097,500 20,804,796,667

Revised risk weighted assets 190,118,398,333 189,291,097,500 188,463,796,667

11.81% 11.43% 11.04%

Revised CAR

Fall in CAR (% age points) 0.76% 1.15% 1.54%

The summary of the impact of increase of the NPLs due to default of Top 10 large borrowers on
the CAR of IFIC Bank Limited is presented below:
5. Credit risk - increase in NPL's due to Top 10 large loan borrowers
Year Particulars 5.00% 7.50% 10.00%
Original CAR 10.37% 10.37% 10.37%
2013 Revised CAR 9.41% 8.93% 8.44%
Fall in CAR 0.95% 1.43% 1.92%
Original CAR 10.14% 10.14% 10.14%
2014 Revised CAR 9.43% 9.07% 8.71%
Fall in CAR 0.71% 1.06% 1.42%
Original CAR 10.07% 10.07% 10.07%
2015 Revised CAR 9.27% 8.86% 8.45%
Fall in CAR 0.80% 1.21% 1.62%
Original CAR 11.25% 11.25% 11.25%
2016 Revised CAR 10.51% 10.14% 9.76%
Fall in CAR 0.74% 1.11% 1.49%
Original CAR 12.57% 12.57% 12.57%
2017 Revised CAR 11.81% 11.43% 11.04%
Fall in CAR 0.76% 1.15% 1.54%

A graph showing original and revised CAR under different scenario for the year 2013 to 2017 is
given below-

18
 Original and Revised CAR

14.00%
12.00%
10.00%
8.00%
6.00%
4.00% Original CAR

2.00% Revised CAR

0.00%
Major

Major

Major

Major

Major
Moderate

Moderate

Moderate

Moderate

Moderate
Minor
Minor

Minor

Minor

Minor
2013 2014 2015 2016 2017

Due to increase in the NPL of the top 10 large borrowers, significant changes in the CAR were
observed in 2017 as the CAR fell by 0.76%, 1.15%, and 1.54% after applying three shocks. In
previous years, the CAR fell below the minimum required CAR of after applying moderate and
major level shocks.
4.4. Exchange Rate Risk

The stress test for exchange rate assesses the impact of change in the exchange rate on the value
of equity. To assess foreign exchange risk the overall net open position of the bank/FI including
the on‐balance sheet and off‐balance sheet exposures shall be charged by the weight of 5%, 10%
and 15% for minor, moderate and major levels respectively. The overall net open position is
measured by aggregating the sum of net short positions or the sum of net long positions;
whichever is greater.
The impact of the respective shocks will have to be calibrated in terms of the CAR. The
tax‐adjusted loss, if any, arising from the shocked position will be adjusted from the capital. The
revised CAR will then be calculated after adjusting total loss from the risk‐weighted assets of the
bank/FI.
The impact of the exchange rate risk on the CAR of IFIC Bank Limited for the year 2017 is
shown on the table below:
Year 2017
Adverse movement 5% 10% 15%

19
Net exposure (8,319,696,766) (8,319,696,766) (8,319,696,766)

Exchange rate loss (415,984,838) (831,969,677) (1,247,954,515)

Tax Rate 0.4 0.4 0.4

-249590903 -499181806 -748772708.9

Tax adjusted loss

Revised capital 24,363,590,903 24,613,181,806 24,862,772,709

Revised risk weighted 192,022,590,903 192,272,181,806 192,521,772,709

assets
Revised CAR 12.69% 12.80% 12.91%

Fall in CAR -0.11% -0.23% -0.34%

The summary of the impact of exchange rate risk on the CAR of IFIC Bank Limited is presented
below:
Exchange Rate Risk
Year Particulars 5% 10% 15%
Original CAR 10.37% 10.37% 10.37%
2013 Revised CAR 10.35% 10.34% 10.32%
Fall in CAR 0.01% 0.03% 0.04%
Original CAR 10.14% 10.14% 10.14%
2014 Revised CAR 10.13% 10.13% 10.12%
Fall in CAR 0.00% 0.01% 0.01%
Original CAR 10.07% 10.07% 10.07%
2015 Revised CAR 10.28% 10.49% 10.70%
Fall in CAR -0.21% -0.42% -0.63%
Original CAR 11.25% 11.25% 11.25%
2016 Revised CAR 11.40% 11.56% 11.72%
Fall in CAR -0.16% -0.31% -0.47%
Original CAR 12.57% 12.57% 12.57%
2017 Revised CAR 12.69% 12.80% 12.91%
Fall in CAR -0.11% -0.23% -0.34%

20
 A graph showing original and revised CAR under different scenario for the year 2013 to 2017 is
given below-

Original and Revised CAR

14.00%
12.00%
10.00%
8.00%
6.00%
4.00% Original CAR

2.00% Revised CAR

0.00%
Major

Major

Major

Major

Major
Moderate

Moderate

Moderate

Moderate

Moderate
Minor
Minor

Minor

Minor

Minor
2013 2014 2015 2016 2017

During the period 2013-2017, the changes in the exchange rates didn’t have a major impact on
the CAR of IFIC Bank Limited. Due to changes in exchange rates, the CARs fell, but didn’t fall
below the required CAR. Even the revised CARs are greater than the original CARs during the
latter years.
4.5 Equity Price Risk

The stress test for equity price risk assesses the impact of the fall in the stock market index.
Appropriate shocks will have to be absorbed to the respective securities if the current market
value of all the on balance sheet and off balance sheet securities listed on the stock exchanges
including shares, NIT units, mutual funds etc. falls at the rate of 10%, 20% and 40%
respectively. The impact of resultant loss will be calibrated in the CAR.
The impact of the equity price risk on the CAR of IFIC Bank Limited for the year 2017 is shown
on the table below-

Fall in stock price 2017

Magnitude of shock 10% 20% 40%
824,432,695 824,432,695 824,432,695
Total exposure in stock market

Fall in the sock prices 82,443,270 164,886,539 329,773,078

21
 Tax adjusted loss 49,465,962 98,931,923 197,863,847

Revised capital 24,064,534,038 24,015,068,077 23,916,136,153

Revised risk weighted assets 191,723,534,038 191,674,068,077 191,575,136,153

12.55% 12.53% 12.48%

Revised CAR

Fall in CAR 0.02% 0.05% 0.09%

The summary of the impact of equity price risk on the CAR of IFIC Bank Limited is presented
below:
Equity Price Risk
Year Particulars 5% 10% 15%
Original CAR 10.37% 10.37% 10.37%
2013 Revised CAR 10.17% 9.98% 9.59%
Fall in CAR 0.19% 0.39% 0.78%
Original CAR 10.14% 10.14% 10.14%
2014 Revised CAR 9.99% 9.84% 9.54%
Fall in CAR 0.15% 0.30% 0.60%
Original CAR 10.07% 10.07% 10.07%
2015 Revised CAR 9.93% 9.80% 9.53%
Fall in CAR 0.13% 0.27% 0.54%
Original CAR 11.25% 11.25% 11.25%
2016 Revised CAR 11.16% 11.07% 10.89%
Fall in CAR 0.09% 0.18% 0.35%
Original CAR 12.57% 12.57% 12.57%
2017 Revised CAR 12.55% 12.53% 12.48%
Fall in CAR 0.02% 0.05% 0.09%

A graph showing original and revised CAR under different scenario for the year 2013 to 2017 is
given below-

22
 Original and Revised CAR

14.00%
12.00%
10.00%
8.00%
6.00%
4.00% Original CAR

2.00% Revised CAR

0.00%
Major

Major

Major

Major

Major
Moderate

Moderate

Moderate

Moderate

Moderate
Minor

Minor

Minor

Minor

Minor
2013 2014 2015 2016 2017

In 2013-2017, the fall in the stock prices didn’t have a major impact on the CAR of IFIC Bank
Limited as highest 0.78% fall in CAR was observed in 2013. Neither original CAR nor the
revised CAR fell below the required CAR.
4.6 Liquidity Shock

The stress test for liquidity risk evaluates the resilience of the banks towards the fall in liquid
liabilities. The ratio “liquid assets to liquid liabilities” shall be calculated before and after the
application of shocks by dividing the liquid assets with liquid liabilities. Liquid assets are the
assets that are easily turned into cash without the threat of loss. They include cash, balances with
Bangladesh Bank and balances with banks, call money lending, lending under repo and
investment in government securities. Liquid liabilities include the deposits and the borrowings.
Appropriate shocks will have to be absorbed to the liquid liabilities if the current liquidity
position falls at the rate of 10%, 20% and 30% respectively. The ratio of liquid assets to liquid
liabilities shall be re‐calculated under each scenario.
The summary and explanation of the liquidity shock are given below-
Liquidity Risk
Year Particulars 10% 20% 30%
Revised Liquid assets 78,845,394,395 70,718,652,195 62,591,909,995
2013 Revised liquid liabilities 73,140,679,800 65,013,937,600 56,887,195,400
Revised liquidity ratio 107.80% 108.77% 110.03%
Fall in liquidity ratio -0.78% -1.75% -3.01%

23
 Revised Liquid assets 88,718,622,135 80,191,623,947 71,664,625,760
2014 Revised liquid liabilities 76,742,983,686 68,215,985,498 59,688,987,311
Revised liquidity ratio 115.60% 117.56% 120.06%
Fall in liquidity ratio -1.56% -3.51% -6.02%
Revised Liquid assets 99,535,651,740 90,445,137,629 81,354,623,519
2015 Revised liquid liabilities 81,814,626,997 72,724,112,886 63,633,598,776
Revised liquidity ratio 121.66% 124.37% 127.85%
Fall in liquidity ratio -2.17% -4.87% -8.35%
Revised Liquid assets 107,322,202,820 97,703,932,204 88,085,661,587
2016 Revised liquid liabilities 86,564,435,546 76,946,164,930 67,327,894,313
Revised liquidity ratio 123.98% 126.98% 130.83%
Fall in liquidity ratio -2.40% -5.40% -9.25%
Revised Liquid assets 124,335,227,515 110,781,932,138 97,228,636,761
2017 Revised liquid liabilities 121,979,658,394 108,426,363,017 94,873,067,640
Revised liquidity ratio 101.93% 102.17% 102.48%
Fall in liquidity ratio -0.19% -0.43% -0.74%

A graph showing the liquidity ratios under different scenario for the year 2013 to 2017 is given
below-

Liquidity Ratio

140.00%
120.00%
100.00%
80.00%
60.00%
40.00% Liquidity ratio

20.00% Revised liquidity ratio

0.00%
Moderate

Moderate

Moderate

Moderate

Moderate
Major

Major

Major

Major

Major
Minor

Minor

Minor

Minor

Minor

2013 2014 2015 2016 2017

4.7 Combined Shock

FI will assess combined shock by aggregating the results of credit shock, equity shock and
interest rate shock. In case of credit shock, increase in NPLs, results of increase in NPLs due to

24
 default of Top large borrowers, fall in the VES, negative shift in all the categories and increase
of NPLs in particular 2 sectors would have to be taken into account.

The combined shock of IFIC Bank Limited for the year 2013 to 2017 is given below-
Combined Shock
Year Combined Shock Scenario1 Scenario2 Scenario3
Tax Adjusted Loss (Combining all shock) 3,336.57 5,671.19 8,267.90
Revised Capital 6,294.28 3,959.65 1,362.95
2013 Revised Risk Weighted Asset 89,578.79 87,244.17 84,647.46
Revised CAR 7.03% 4.54% 1.61%
Fall in CAR(% age points) 3.34% 5.83% 8.76%
Required CAR 10% 10% 10%
Tax Adjusted Loss (Combining all shock) 3,461.21 5,895.04 8,443.57
Revised Capital 7,847.23 5,413.41 2,864.87
2014 Revised Risk Weighted Asset 108,112.48 111,418.96 142,079.43
Revised CAR 7.26% 4.86% 2.02%
Fall in CAR(% age points) 2.88% 5.28% 8.12%
Required CAR 10% 10% 10%
Tax Adjusted Loss (Combining all shock) 3,542.67 6,157.09 10,153.27
Revised Capital 8,270.33 5,655.91 1,659.73
2015 Revised Risk Weighted Asset 113,771.33 111,156.91 107,160.73
Revised CAR 7.27% 5.09% 1.55%
Fall in CAR(% age points) 2.80% 4.98% 8.52%
Required CAR 10% 10% 10%
Tax Adjusted Loss (Combining all shock) 3,347.13 5,733.71 9,417.35
Revised Capital 13,579.87 11,193.29 7,509.65
2016 Revised Risk Weighted Asset 147,175.87 144,789.29 141,105.65
Revised CAR 9.23% 7.73% 5.32%
Fall in CAR(% age points) 2.02% 3.51% 5.92%
Required CAR 10.625% 10.625% 10.625%
Tax Adjusted Loss (Combining all shock) 5,702.28 10,207.04 16,300.23
Revised Capital 18,411.72 13,906.96 7,813.77
2017 Revised Risk Weighted Asset 186,070.72 181,565.96 175,472.77
Revised CAR 9.90% 7.66% 4.45%
Fall in CAR(% age points) 2.68% 4.91% 8.12%
Required CAR 11.25% 11.25% 11.25%

A graph showing the combined shock under different scenario for the year 2013 to 2017 is given
below-

25
 Combined Shock

12.00%
10.00%
8.00%
6.00%
4.00% Revised CAR
2.00% Required CAR
0.00%
Scenario1

Scenario2

Scenario3

Scenario1

Scenario2

Scenario3

Scenario1

Scenario2

Scenario3

Scenario1

Scenario2

Scenario3

Scenario1

Scenario2

Scenario3
2013 2014 2015 2016 2017

4.8 Insolvency Ratio

The NPL to Loan Ratio of an FI is said as the Infection Ratio. Infection Ratio which can
completely erode the regulatory capital of the FI to zero is the Critical Infection Ratio (CIR).
CIR implies Distance to Default or Insolvency. Computation of CIR assumes the erosion of full
regulatory capital due to increase in NPL in Bad/Loss Category ignoring the tax impact. The
higher the CIR, the stable the FI is and the lower the CIR the closer the FI is to default.
Insolvency ratio is the ratio of Infection Ratio to the Critical Infection Ratio. IR implies the
percentage, an FI is, towards insolvency. Simplified formula to calculate IR is:

IR =

Where,

CIR =

For Stress Testing, after shock IR is computed using the average revised NPL and Average
revised Regulatory Capital of standard shock scenarios in four Credit risk areas, namely: increase
in NPLs, Downward shift in all Categories, Increase in NPLs' under B/L category in 2 sectors
and Increase in NPLs' due to Top large borrowers.
The insolvency ratio of IFIC Bank Limited for the year from 2013 to 2017 is given below-

26
 Basic Information 2013 2014 2015 2016 2017
Regulatory capital 9,630,845,995 11,308,447,905 11,813,000,000 16,927,000,000 24,114,000,000
Total loan 80,942,309,394 102,282,149,309 123,268,667,873 137,118,111,549 179,264,206,747
Total NPL 3,168,075,634 5,061,133,652 7,962,051,830 7,250,942,884 11,477,879,667
Infection Ratio (NPL
3.91% 4.95% 6.46% 5.29% 6.40%
to Loans)
Critical infection
15.81% 16.00% 16.04% 17.63% 19.85%
ratio
Insolvency ratio 24.75% 30.92% 40.26% 29.99% 32.25%

A graph showing the infection ratio for the year 2013 to 2017 is given below-

Infection Ratio (NPL to Loans)

2013 2014 2015 2016 2017

Infection Ratio (NPL to Loans) 3.91% 4.95% 6.46% 5.29% 6.40%

Here, it can be seen that, the infection ratio is showing an upward trend. It was higher in 2014
due to higher NPL. But in 2016 the NPL was lower but in 2017, the NPLs was higher compared
to previous years so as the loan amount.

A graph showing the critical infection ratio for the year 2013 to 2017 is given below-

27
 Critical infection ratio

2013 2014 2015 2016 2017

Critical infection ratio 15.81% 16.00% 16.04% 17.63% 19.85%

Capital infection ratio implies that, if the CIR is higher, the FI will be stable and if, the CIR is
lower, the FI is close to default. Here, it can be seen that, CIR is showing an increasing trend
over the years which means that, IFIC Bank Limited is quite stable.

A graph showing the insolvency ratio for the year 2013 to 2017 is given below-

Insolvency ratio

2013 2014 2015 2016 2017

Insolvency ratio 24.75% 30.92% 40.26% 29.99% 32.25%

IR shows the percentage, an FI is, towards insolvency. Here the graph is showing an increasing
trend from the year 2013 to 2015. But this ratio decreased in 2015 and again increased in 2017
implying that, IFIC Bank Limited has 32.25% possibility to become insolvent.

28
 4.9 Resilience of the FI

Resilience Level for Interest rate, Credit and Equity price shocks are set with the Minimum
Capital Adequacy Ratio (CAR). In the stress test it is checked whether an FI has adequate capital
base after the shock impact.
Resilience Level for Liquidity shocks are identified with the following three parameter:
 Negative gap during 1-90 days time buckets exceed 15% .
 The cumulative gap up to the one-year period exceeds 15% .
 Counter balancing capacity up to the one-year period dry out .

The impact of the liquidity risk on IFIC Bank Limited for the year 2017 is shown on the table
below-

Current Scenario (1=Satisfactory; 0=Unsatisfactory) 2017

1 1 1
Negative Gap During 1-90 days time buckets

Cumulative Gap up to 1 year 1 1 1

Counter balancing capacity up to 1 year 1 1 1

Overall Rating 1.1.1 1.1.1 1.1.1

The summary of the impact of liquidity risk on IFIC Bank Limited is presented below-

Current Scenario (1=Satisfactory; 0=Unsatisfactory)

Year Particulars

Negative Gap During 1-90 days time buckets 1 1 1

Cumulative Gap up to 1 year 1 1 1
2013
Counter balancing capacity up to 1 year 1 1 1
Overall Rating 1.1.1 1.1.1 1.1.1
Negative Gap During 1-90 days time buckets 1 1 1
2014 Cumulative Gap up to 1 year 1 1 1
Counter balancing capacity up to 1 year 1 1 1

29
 Overall Rating 1.1.1 1.1.1 1.1.1
Negative Gap During 1-90 days time buckets 0 0 0
Cumulative Gap up to 1 year 0 0 1
2015
Counter balancing capacity up to 1 year 1 1 1
Overall Rating 0.0.1 0.0.1 0.1.1
Negative Gap During 1-90 days time buckets 1 1 1
Cumulative Gap up to 1 year 0 1 1
2016
Counter balancing capacity up to 1 year 1 1 1
Overall Rating 1.0.1 1.1.1 1.1.1
Negative Gap During 1-90 days time buckets 1 1 1
Cumulative Gap up to 1 year 1 1 1
2017
Counter balancing capacity up to 1 year 1 1 1
Overall Rating 1.1.1 1.1.1 1.1.1

When,
 Negative gap during 1-90 days time buckets exceed 15% it is satisfactory.
If the negative gap during 1-90 days time buckets is lower than 15% it is unsatisfactory.
 The cumulative gap up to the one-year period exceeds 15%, it is unsatisfactory.
If the cumulative gap up to the one-year period is lower than 15%, it is satisfactory.
 If the counter balancing capacity up to 1 year is positive, it is satisfactory.
If the counter balancing capacity up to 1 year is negative, it is unsatisfactory.

Liquidity Risk

Liquidity Risk
Year Particulars
Minor Moderate Major
Magnitude of Shock
5% 7% 10%
2013
Negative Gap During 1-90 days time buckets 3.39% 1.62% -0.98%
Cumulative Gap up to 1 year 8.00% 6.62% 4.58%

30
 Counter balancing capacity up to 1 year 23,659,551,387 22,463,874,983 20,670,360,377
Negative Gap During 1-90 days time buckets 11.55% 9.64% 6.86%
2014 Cumulative Gap up to 1 year 13.56% 11.59% 8.70%
Counter balancing capacity up to 1 year 31,881,718,595 30,117,407,270 27,470,940,284
Negative Gap During 1-90 days time buckets 29.12% 26.44% 22.54%
2015 Cumulative Gap up to 1 year 17.96% 16.11% 13.40%
Counter balancing capacity up to 1 year 37,251,971,584 36,944,209,106 32,926,253,356
Negative Gap During 1-90 days time buckets 9.19% 3.33% 4.90%
2016 Cumulative Gap up to 1 year 18.32% 10.78% 13.00%
Counter balancing capacity up to 1 year 41,471,949,216 33,946,993,141 36,043,000,257
Negative Gap During 1-90 days time buckets -1.36% -2.98% -5.35%
2017 Cumulative Gap up to 1 year 3.60% 1.84% -0.73%
Counter balancing capacity up to 1 year 30,873,047,752 28,216,685,659 24,232,142,518

4.10 WAR-WIR Matrix

Overall financial strength and resilience of an NBFI will be identified plotting its achieved
ratings in the WAR-WIR Matrix. The overall zone setting of an FI will be determined with 80%
weight of WAR and 20% weight of WIR as under:

WAR

Green Yellow Red

Green GG GY GR
WIR
Yellow YG YY YR

Red RG RY RR

WAR and WIR of the particular FI will be used to determine its adequate capital requirement in
Basel Accord and will be impacted on the CAMELS rating conducted by the central bank.

31
Recommended Action Plan

Weighted Average
Zone Resilience Recommended Action Plan
Recommendations:
Green WAR> 80% Monitor strictly any downturn of performance
indicators.
Recommendations:
Three Year Capital Management Plan
Recovery Plan of NPL
Increase Securities
Yellow 60%<WAR 80% Credit Diversification Plan
Policy for Investment in Shares
Liquidity Contingency Plan
Ensure proper compliance of ALM Guidelines
ALCO meeting minutes.
Submission to BB:
Three Year Capital Management Plan
ALCO meeting minutes.
Recovery Plan of NPL
Red WAR<60% Increase Securities
Credit Diversification Plan
Policy for Investment in Shares
Liquidity Contingency Plan
ALCO meeting minutes.

The WAR-WIR MATRIX of IFIC Bank Limited is given below-

Year WIR Matrix Rating Zone WAR Matrix Rating Zone

2013 31.65% 3 47 4
2014 28.65% 3 44 4
2015 29.19% 3 32 5
2016 22.01% 3 54 4

32
2017 17.44% 2 75 2

Here, it can be seen that, IFIC Bank Limited is in Red Zone for the past four years (2013-2016)
which means, the WAR is below 60%. For Red Zone, recommended action plans are-

Submission to BB:
 Three Year Capital Management Plan
 ALCO meeting minutes.
 Recovery Plan of NPL
 Increase Securities
 Credit Diversification Plan
 Policy for Investment in Shares
 Liquidity Contingency Plan
 ALCO meeting minutes.

In 2017, IFIC Bank was in Yellow Zone. For Yellow Zone, recommended action plans are-

Recommendations:
Three Year Capital Management Plan
Recovery Plan of NPL
Increase Securities
Credit Diversification Plan
Policy for Investment in Shares
Liquidity Contingency Plan
Ensure proper compliance of ALM Guidelines
ALCO meeting minutes

Decision Model Rules

The WAR-WIR MATRIX of IFIC Bank Limited for the years from 2013 to 2017 is given below-

2013

WAR 2013
WIR Green Yellow Red

33
 Green
Yellow
Red RY

Here, it can be seen that, IFIC Bank Limited is in Red Zone for WAR and Yellow Zone for WIR.

2014

WAR 2014
Green Yellow Red
WIR
Green
Yellow
Red RY

Here, it can be seen that, IFIC Bank Limited is in Red Zone for WAR and Yellow Zone for WIR.

2015

WAR 2015
Green Yellow Red
Green
WIR
Yellow
Red RY

Here, it can be seen that, IFIC Bank Limited is in Red Zone for WAR and Yellow Zone for WIR.

2016

WAR 2016
Green Yellow Red
Green
WIR
Yellow
Red RY

Here, it can be seen that, IFIC Bank Limited is in Red Zone for WAR and Yellow Zone for WIR.

2017

WAR 2017

34
 Green Yellow Red
Green
WIR
Yellow YY
Red

Here, it can be seen that, IFIC Bank Limited is in Yellow Zone for WAR and Yellow Zone for
WIR.

35
 Chapter-5: Conclusion
Extreme market movements or crises in the past reveal the inadequacy of managing risks based
only on normal business conditions and historical trends. In particular, crises in the 1990’s (e.g.
Asian Crisis) and current financial turmoil have augmented the importance of better
understanding of potential vulnerabilities in the financial system and the measures to assess these
vulnerabilities for both the regulators and the bankers. The regulators and managers of the
financial system around the globe have developed a number of quantitative techniques to assess
the potential risks to the individual institutions as well as financial system.
Stress testing was done on IFIC Bank Limited that now holds 32.75% of the share capital of the
Bank. Directors and Sponsors having vast experience in the field of trade and commerce own
11.31% of the share capital and the rest is held by the general public. The test showed has
moderate capacity to tolerate the major level of shocks. Though the revised CAR for different
types of shocks were lower for the beginning years, it showed a satisfactory result for the year
2017.
Inadequacy of managing the risks might turn the financial institution into crisis. Overall
performance of IFIC Bank Limited is satisfactory. Still there are opportunities to progress.
through analysis of the last 5 years, overall financial performance of IFIC Bank Limited shows a
good prospect for future profitability and success.

36
 Chapter-6: Bibliography
01. https://www.bb.org.bd/aboutus/regulationguideline/apr212010stressdos.pdf
02. https://www.bb.org.bd/mediaroom/circulars/dos/apr212010dos01e.pdf
03. https://www.bb.org.bd/aboutus/regulationguideline/guidelist.php
04. www.ificbank.com.bd

IFIC Bank Limited Annual Report

 Annual Report 2013

 Annual Report 2014
 Annual Report 2015
 Annual Report 2016
 Annual Report 2017

37