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National Credit Ratings Ltd

Merchant Bank Rating Methodology

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MERCHANT BANK RATING METHODOLOGY

 

Merchant banking in Bangladesh is growing with the growth of capital market. According to Merchant Banking Regulation 1996, the activities of merchant banking are limited to issue management, underwriting and portfolio investment management services.

In Merchant Bank rating, NCR follows the similar process it follows in rating of Brokerage Houses. Some additional parameters are come under the consideration to assess the issue management and underwriting performance of Merchant Bank.  Here, NCR affords an analytical framework that focuses on the key operational, financial and qualitative factors. These factors are most critical in assessing the overall performance, competitive positioning and its ability to withstand adverse operating environment & service its debt obligations. NCR’s rating methodology involves an in-depth analysis of several qualitative and quantitative factors, those are:

Qualitative Factors:

§  Ownership   

 

§  Governance

§  Management

                       -        Stability and Experience of the top management

                       -        Track record of success  

  • Customer Relationship

                       -        Adequacy of practices

                       -        Range of products

  • Risk Management Framework

                       -        Operational Risk:

                                    -        Process and Procedures

                                    -        Use of technology

                                   -           MIS

                       -        Back Office Operation

-          Quality of Compliance:

                                       -        Compliance records

                                       -        Internal controls measures for compliance

 

Quantitative Factors:

  • Credit risk

                       -        Credit appraisal system

                       -        Counter-party limits

                       -        Margin call policy

                       -        Concentration of business

                       -       Loan loss provision and provision against outstanding loan

§  Market Risk

                       -        Policy based exposure limits

                       -        Auto square off mechanism

                       -        Own portfolio transaction volume

-                Provision against diminution in value of quoted securities

-               Investment made under the BSEC rules

§  Liquidity Risk

                       -        Policy framework

                       -        Unutilized credit lines

                       -        Margin adequacy

                       -            Fund management

§  Financial Strength

                       -        Profitability

                      -        Sustainability

                      -        Efficiency

                      -      Capital Adequacy

                      -      Net Capital Balance

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For further details please contact:

 

National Credit Ratings Ltd

3 Bijoy Nagar (2nd & 3rd Floor)

Dhaka-1000

Tel: 0088-02-9359878, Fax: 0088-02-9332769
Website: www.ncrbd.com

 




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