Under the PCA framework, banks are required to complete a schedule of corrective actions as directed by the BB based on selected parameter indicators i.e. Capital to Risk-weighted Assets Ratio (CRAR), Tier 1 Capital Ratio, Common Equity Tier 1 (CET 1) . Ratio, Net Non-Performing Loans (NPL) and Corporate Governance.
A bank that continues to show decline in all five indicators will be classified as ‘unsafe’ and ‘financially unsound or weak’ by Bangladesh Bank. A bank falling into two categories simultaneously will be classified as the ‘weakest’ bank.
If the concerned bank fails to implement the plan to address its weakness, Bangladesh Bank may initiate punitive measures or compulsory merger with another bank. People concerned said that measures should now be taken for merger of banks under this framework and the process should start as soon as possible.