10 banks, 3 NBFIs make it to latest BB Sustainability Rating list
Four new banks were added to the list
Ten banks and three non-bank financial institutions (NBFIs) have been awarded the Bangladesh Bank's Sustainability Rating 2023, with BRAC Bank, City Bank, and IDLC Finance making it to the list for the fourth consecutive year.
The central bank has published the rating based on sustainable investments by banks and financial institutions in the country.
In the 2022 edition, seven banks and four financial institutions received these ratings.
"I have been verbally informed that City Bank has achieved the topmost position this year, which is a matter of special satisfaction," said Mashrur Arefin, managing director of City Bank.
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Forty-five marks out of 100 in this rating come from a bank's core performance ratios – profitability, liquidity, capital adequacy, NPL ratio, etc. Additionally, 10 marks are awarded for a bank's distribution networks of all kinds, i.e. both its physical and digital presence in the country, he said.
"Of course, we excel in sustainable and green finance practices, but the fact is, this rating signifies that we are a very good bank in a comprehensive, overall sense. We would like to continue on the same course and keep building the trust of all our customers in the same way," Mashrur added.
In 2023, BRAC Bank, City Bank, Eastern Bank, Exim Bank, Jamuna Bank, Mutual Trust Bank, Prime Bank, Trust Bank, United Commercial Bank, and Uttara Bank made it to the list. Additionally, IDLC Finance, IPDC Finance, and United Finance Limited were the financial institutions on the list.
The four new banks that achieved the rating in 2023 are Eastern Bank, EXIM Bank, Mutual Trust Bank, and Uttara Bank.
Chowdhury Liakat Ali, director of the central bank's Sustainable Finance Department, said, "We base our sustainable ratings on five key factors – Sustainable Finance Indicator, Green Refinance, Corporate Social Responsibility (CSR), and Core Banking Sustainability. We establish specific parameters, and banks that meet these criteria are included in the top list."
He clarified that the order in which the banks and financial institutions are listed for sustainable finance is alphabetical and does not indicate their ranking based on performance indicators.
"Banks and financial institutions not listed in our report are not necessarily underperforming. They may have missed the rating due to lower levels of sustainable investment this year. By increasing their investments in sustainability next year, they can qualify for inclusion," he said.
A top central bank official told TBS that the sustainability rating gives good marks for green finance and investment in sustainable finance. About 60% of the scoring is allocated to two components: core banking sustainability and banking services coverage. Banks that excel in managing bad loans and capital receive higher scores in this sector.
According to the central bank's Sustainable Finance Policy, the Core Banking Sustainability component includes metrics such as the net non-performing loan (NPL) rate, core capital (Tier-1) against risk-weighted assets, provision maintenance ratio, net CMSME loans and advances outstanding to net loans and advances outstanding ratio, and exceeding the large loan portfolio ceiling against the bank's total loans and advances. Emphasis is placed on these metrics in scoring.
In addition, under the Banking Services Coverage component, approximately 10% of the marks are assigned based on factors such as the number of branches, deposit accounts, loan accounts, and agent outlets.
The central bank introduced this sustainability rating in 2020. Initially, three Sharia-based banks were included in the list: Islami Bank Bangladesh Limited, Al-Arafah Islami Bank Limited, and Exim Bank Limited. In 2022, only one Sharia-based bank was rated, and similarly, in 2023, only one bank made it to the rating.
