The central bank asks banks to submit their recovery plans, with prior approval from their respective boards of directors, in a test of their strengths and witnesses so that any downside risk can be fixed.
Under the directive of the Bangladesh Bank, the banks will have to submit respective first recovery plan to the Department of Offsite Supervision (DOS) of the BB by June 30.
The plan has to be prepared considering minimum five stress scenarios on the business strategies aiming to protect banks' ongoing functions for the financial intermediation process and to uphold public confidence in the banking system, officials say.
Business strategies include different indicators of funding, liquidity, capital, asset growth and profitability.
Besides, an update of the each recovery plan will have to be submitted by the banks to the DOS on a regular basis within 31st January each year, according to a notification issued Thursday by the central bank.
"BB reserves the right to adjust these requirements to the circumstances of each bank, and will review the recovery plan of banks as part of regular ongoing supervisory process," it notes.
Managing directors (MDs) of all the scheduled banks have also been asked to place this notification in the next board meeting for information of the board members to comply with the instructions.
"The plan will be ensured maximizing a bank's survival prospects without supervisory or government intervention/support/forbearance," a BB senior official told the FE in reply to a query.
It will also help to equip a bank in practice for taking necessary actions to bring back its financial and operational strengths, he adds.
The central banker also says the impact on the business strategies induced by each of the stress scenarios will be assessed and a recovery plan, with options and proper justifications, depicting the process and responsibilities of persons involved, must be prepared to uphold the business strategies.
