Financial institutions must have provision against unadjusted expenses: BB

Financial institutions can no longer include unadjusted expenses in their assets, according to a directive issued by the central bank on Sunday. 

Payments like advance salaries, travel and recreational expenses, advertisement cost and business development expenses must be recorded as individual provisions. 

Based on the latest directive, if such funds remain unadjusted for 12 months or more, they should be classified 'bad and loss' and have 100% provision against those.

It further says expenses related to any unresolved legal measures must have 50% provision against it and be classified as 'doubtful'. On the other hand, expenses linked with legal measures which are resolved will be subject to maintaining 100% provision against them and be classified 'bad and loss'. 

Protested bills like forgery, embezzlement, misappropriation of funds are to be classified 'doubtful' and have 50% provision against those.  However, in case of uncertainty over recovery of protested bills, the classification is 'bad and loss' and needs to have 100% provision.  

The Bangladesh Bank also instructed the financial institutions to update classification of assets and record provisions every three months. 

A report in this regard is to be sent to the central bank within the next 30 days, it added.