The Basel-II accord will come into effect in Bangladesh from January 1, 2009, alongside the Basel-I to consolidate capital base of the banks.

The banks will be allowed to follow both Basel-II and Basel-I frameworks for 2009 to calculate their capital adequacy. But the banks will have to implement Basel-II framework from January 2010. This year is a trial period for the banks for improving their efficiencies to implement the Basel-II accord from 2010.

The central bank issued guidelines on Risk-base Capital Adequacy for banks' aiming to start implementation of the Basel-II framework in the country's banking system.

The new Basel-II accord has been prepared on the basis of three pillars: minimum capital requirement, supervisory review process and market discipline.

Three types of risks - credit risk, market risk and operational risk have to be considered under the minimum capital requirement.

A study carried out by local banks suggested initial implementation of Basel-II with three specific approaches. The approaches are standardized approach for calculating risk-weighted assets against credit risk, standardized (Rule-base) approach for calculating risk-weighted assets against market risk and the basic indicator approach for calculating risk- weighted assets against operational risk.

Credit rating is to be determined on the basis of risk profile assessed by the External Credit Assessment Institutions duly recognized by BB. The central bank earl let issued guidelines for recognition of eligible External Credit Assessment institutions to assess credit risks in line with the Basel-II framework.

The central bank has already increased the amount of the requirement minimum capital for commercial banks to 10 percent of their risk-weighted assets from 9.0 percent to consolidate its capital base aiming to implement the Basel-II framework.