final 425.pdf - Chapter-01 Introduction 1.0 Introduction The banking industry is one of the most heavily regulated industries in the world and gets a

final 425.pdf - Chapter-01 Introduction 1.0 Introduction...

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1 | P a g e Chapter-01: Introduction 1.0 Introduction The banking industry is one of the most heavily regulated industries in the world and gets a great deal of attention in the economic literature considering that banks serve a pivotal role in the economy. Banks play an important role in economic development through mobilization of funds from within and outside the country and channeling such funds to various sectors of the economy. The capital adequacy ratio is a comprehensive index to reflect the risk of banks, but also the bank's asset-liability management one of the benchmark targets. Banks must maintain a capital adequacy ratio at specific minimum level in order to avoid risks and bankruptcy. The regulators of capital requirements seek to guarantee that risk exposure on financial institutions and banks are supported by an adequate amount of capital which bears unexpected losses arising in the future. In practical use, the banks are not only using the capital adequacy ratio to measure their own risk, but also through this objective comparison of the indicators with industry, so that the capital adequacy ratio has a universal significance. The loan defaults are not always willful it has been observed that the loan defaults are also circumstantial where in the borrower has little control on the externalities. The banks have to suffer huge losses due to their non-performing loans and the Banks Capital is badly impaired. Therefore it is very necessary to dig out the factors which determine the Capital adequacy ratio so that the other elements may also be taken in to account for a better capital management. The main purpose of this study is to know the effectiveness of Bangladesh‟s commercial banks‟ capital adequacy ratio. 1.1 Significance of the study This study makes a number of contributions towards extended research in the area of the effectiveness of capital adequacy ratio of commercial banks in Bangladesh. It draws some conclusions and will the effectiveness of capital adequacy ratio of commercial banks significantly. Thus, it gives hint to the regulators such as national bank of Bangladesh and the concerned party when issuing banking capital regulations and making policy. It also helps other researchers as a source of reference and as a stepping stone for those who want to make further study on the area afterwards. Finally, it gives all stake holders the opportunity to gain deep knowledge about the effectiveness of capital adequacy ratio of commercial banks.
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2 | P a g e 1.2 Objectives of the study General objective: The main objective of the study is to examine the effectiveness of Bangladeshi commercial banks‟ capital adequacy ratio. Specific objective: To know about the impact of return on total assets on capital adequacy ratio of Bangladeshi commercial banks‟.
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  • Spring '11
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