Recent list of red, yellow and green banks doesn’t reflect reality: Central bank

The central bank, at today's (12 March) press briefing with print and electronic media, essentially cancelled the categorisation of banks under three colour codes announced yesterday (11 March).

"This is not the correct method for judging the health status of banks," Bangladesh Bank spokesperson Mezbaul Haque told reporters at the briefing.

"Various departments within Bangladesh Bank prepare numerous lists of banks at different times. This particular list was based solely on a few statistical assumptions and does not represent or reflect reality," he said.

"The department was attempting to determine the potential impact on banks under certain kinds of shocks," he added.

Mezbaul continued that the central bank conducts such studies regularly, and they are not for public release because they are neither conclusive nor real.

"The CAMELS rating, which is confidential, is the only method to accurately determine the health of banks based on their audited financial statements, not on any probabilistic data," he said.

Mezbaul stressed the Prompt Corrective Actions (PCA) framework, which will categorise the weak banks under four groups.

He said, "Our various departments assess various components regularly for financial risk management. But it is not a real health indicator. We developed a PCA framework to classify banks. As a result, banks will be evaluated in four categories. This will be done based on the balance sheet of 2024."

He also said, "We have to keep some reports undisclosed for the national interest. The CAMELS ratings on our banks are never meant to be public."

Several media outlets on Monday published reports on the latest edition of the "Banks Health Index and HEAT Map", a biennial report prepared by the Financial Stability Department of the central bank.