a) The name of the top corporate entity inthe Group to which this guidelinesapplies

The Bank does not belong to any group.

b) An outline of differences in the basis ofconsolidation for accounting andregulatory purposes, with a briefdescription of the entities within thegroup i) that are fully consolidated ii)that are given a deduction treatment andiii) that are neither consolidated nordeducted (e.g. where the investment isrisk weighted)

Uttara Bank Limited (The Bank) had been a nationalizedbank in the name of Uttara Bank under the Bangladesh Bank(Nationalization) order 1972, formerly known as the EasternBanking Corporation Limited. The Bank started functioning onand from 28.01.1965. Consequent upon the amendment ofBangladesh Bank (Nationalization) Order 1972, the UttaraBank was converted into Uttara Bank Limited as a publicLimited company in the year 1983. The Uttara Bank Limitedwas incorporated as a banking company on 29.06.1983 andobtained business commencement certificate on 21.08.1983.The Bank floated its shares in the year 1984. The Bank is listedin the Dhaka Stock Exchange Limited and Chittagong StockExchange Limited as a publicly quoted company for trading ofits shares.

The Registered Office of the Bank is located at 47, Shahid Bir

Uttam Ashfaqus Samad Sarak (Former 90, MotijheelCommercial Area) Dhaka- 1000. It has 220 branches all overBangladesh through which it carries out all its bankingactivities.In the consolidated accounts Bank’s subsidiary/ Associates andJoint venture are treated as under:a) Subsidiaries: Presently Bank has two subsidiaries named

“UB Capital and Investment Ltd” and “Uttara BankSecurities Limited”. The descriptions of those subsidiariescompanies are given below :

UB Capital and Investment Ltd.“UB capital and Investment Limited” was incorporated as apublic limited company with the Registrar of Joint StockCompanies and Firms, Dhaka Bangladesh on September28,2010 under the companies Act, 1994 bearing registration noC-87220/10.

DISCLOSURES ON RISK BASED CAPITAL (BASEL-II)(Based on Status of December 31, 2013 )

BackgroundThe following detailed qualitative and quantitative disclosures are provided in accordance with Bangladesh Bankrules and regulations on risk based capital adequacy under Basel II of Pillar III. The purpose of these disclosures isto present relevant information on adequacy of capital in relation to overall risk exposures of the Bank so that themarket participants can assess the position and direction of the Bank in making economic decision.

The disclosures of the Bank under Basel-II requirements based on the position as of 31.12.2013 are presented as per

the guidelines of Bangladesh Bank vide BRPD Circular No.24 dated 03.08.2010 and No. 35 dated 29.12.2010 on

“Risk Based Capital Adequacy on Banks”. These disclosures are intended for stake holders to access key

information about the Bank’s exposure to various risks and to provide a consistent & understandable framework for

easy comparison among peer banks operating in the market.

1. SCOPE OF APPLICATION:Qualitative Disclosures

The main activities of the company is to act as a full fledgedmerchant banker and portfolio manager to provide services likeunderwriting public issue of shares, buy and sell ofshares/securities on behalf of clients under portfoliomanagement operation etc. The company is also authorized tobuy, sell, hold or otherwise acquire or investment the capital ofthe company in shares, stock and fixed income securities.The Registered office of the company is at 90, Motijheel C/A,

Dhaka. Licence to be obtained from Securities and ExchangeCommission for starting operation.Uttara Bank Securities Limited: Uttara Bank Securities Limited(the company) was incorporated as a public limited companywith the Registrar of Joint Stock Companies and Firms, DhakaBangladesh on June 13,2013 under the Companies Act, 1994bearing registration No.109691/13. The Registered Office ofthe company is at 47, Shahid Bir Uttam Asfaques Samad Sarak(Old 90, Motikheel C/A) Dhaka.b) Associates: Presently Bank has no associatesc) Joint venture: Bank has no joint venture.

c) Any restrictions, or other majorimpediments, on transfer of funds orregulatory capital within the Bank.

Not applicable.

Qualitative Disclosuresa) Summary information on the terms and

conditions of the main features of all capitalinstruments, especially in the case of capitalinstruments eligible for inclusion in Tier-1 orTier-2.

The terms and condition of the main feature of all capitalinstrument have been segregated in terms of theeligibility criteria set forth vide BRPD circular No 35dated 29 December 2010 and other relevant instructionsgiven by Bangladesh Bank from time to time. The mainfeatures of the capital instruments are as follows:Tier-1 capital instruments:Paid up share capital, Share Premium, Statutory Reserve,Dividend equalization account, Retained earnings.Tier-2 capital instruments:General provision maintained against unclassified loansand off-balance sheet exposure, Subordinate Debt capital,50% Asset Revaluation Reserve, 50%RevaluationReserve of HTM securities, 50%Revaluation Reserve ofHFT securities,

Sl. Particulars Amount in crore

1.1 Fully Paid-up Capital/Capital lien with BB 363.71

1.2 Statutory Reserve 368.08

Quantitative Disclosuresa) The aggregate amount of Capital

deficiencies in all subsidiaries notincluded in the consolidation that are

Not applicable.

deducted and name(s) of suchsubsidiaries.

2. CAPITAL STRUCTURE:

Quantitative Disclosures

2 Tier-2 (Supplementary Capital)2.1 General provision (unclassified loans, SMA+ Off Balance Sheet exposure) 58.97

2.2 Asset Revaluation Reserve upto 50% 95.98

2.3 Revaluation Reserves for Securities upto 50% 10.54

2.4 Revaluation Reserves for equity instruments up to 10% -2.5 All other preference shares -2.6 Subordinated debt -2.7 Other (if any item approved by Bangladesh Bank) -2.8 Sub- Total(2.1 to 2.7) 165.49

2.9Deductions if any (e.g. investments in subsidiaries which are not consolidated50%) -

2.10 Total Eligible Tier-2 Capital (2.8 - 2.9) 165.49

1.3

1.4

1.5

1.6

1.7

1.8

1.9

1.10

1.11

1.12

1.13

1.14

1.15

1.16

1.17

1.18

1.19

1.20

Non-repayable Share premium account

General Reserve

Retained Earnings

Minority interest in Subsidiaries

Non-Cumulative irredeemable Preferences shares

Dividend Equalization Account

Other (if any item approved by Bangladesh Bank)

Sub-Total: (1.1 to 1.9)

Deductions from Tier-1 (Core Capital)

Book value of goodwill and value of any contingent assets which are shown asassets

Shortfall in provisions required against classified assets

Shortfall in provisions required against investment in shares

Remaining deficit on account of revaluation of investments in securities afternetting off from any other surplus on the securities.

Reciprocal crossholdings of bank capital/subordinated debt

Any investment exceeding the approved limit under section 26(2) of Bank Company Act,1991

Investments in subsidiaries which are not consolidated

Other (if any)

Sub Total (1.11 to 1.18)

Total Eligible Tier-I Capital (1.10 -1.19)

-

19.56

97.09

-

-

6.44

-

854.88

-

-

-

-

-

-

-

-

-

854.88

* In compliance with the instruction contained in BRPD Circular No. 11 dated December 2011.

3. CAPITAL ADEQUACY:

Qualitative Disclosures

a) A summary discussion of the Bank’s approach toassessing the adequacy of its capital to supportcurrent and future activities

i. Bangladesh Bank adopted Basel-1 for credit riskthrough BRPD circular No. 01 dated January 08,1996. Bank fully complied Basel-I capitalrequirement.

ii. A Quantitative Impact Study (QIS) was done byBangladesh Bank to implement the Basel-II inBangladesh in 2007

iii. To implement Basel-II, Bangladesh Bank haspublished Roadmap on December 30, 2007 andBasel-II Guidelines through BRPD circular No.09dated December 31, 2008.

iv) Bangladesh Bank has recognized External CreditAssessment Institutions (ECAIs) through BRPDcircular No. 05 dated April 29, 2009.

v) According to BRPD circular No.10 dated March10,2010, Minimum Capital Requirement (MCR)was 8% upto June 30, 2010 and will be 9% uptoJune 30,2011 and 10% from July 01, 2011. Bankhas fully complied Basel-II Capital Requirementin 2011.

vi) As per Section 13(2) of the Bank Companies Act1991and instruction contained in BRPD circularNo. 35 dated 29 December 2010 (Guidelines on“Risk based Capital Adequacy for Banks) revisedregulatory capital frame work in line with Basel-II

Sl No. Particular Total risk weight Capital charge@ 10%

a) Capital requirement for Credit Risk 6314.02 631.40b) Capital requirement for Market Risk 816.38 81.64c) Capital requirement for Operational Risk 1064.77 106.48

Total Risk weighted assets 8195.17 819.52Capital adequacy ratio: 12.45%Tier-I Capital 10.43%Tier-II Capital 2.02%

Sl No. Particular Total risk weight Capital charge@ 10%

a) Capital requirement for Credit Risk 6271.07 627.11b) Capital requirement for Market Risk 816.41 81.64c) Capital requirement for Operational Risk 1064.77 106.47

Total Risk weighted assets 8152.24 815.22Capital adequacy ratio: 12.54%Tier-I Capital 10.51%Tier-II Capital 2.03%

(For stand alone)

(For the consolidated group)

4.CREDIT RISK:

Quantitative Disclosure

Qualitative Disclosures

(Figure in crore)

a) The general qualitative disclosurerequirement with respect to credit riskincluding:Definitions of past due and impaired (foraccounting purposes)

Credit Risk is the risk of financial loss resultingfrom failure by a client or counterparty to meet itscontractual obligations to the Bank.Default and Classified Assets:Default loan in respect to which recipientbeneficiary fails to make timely payment of interestor principal as per the agreed schedule forrepayment. Classified loans are bank loans that havebeen issued according to the terms and regulationsof the bank, but later become suspect of recovery interms of unpaid interest and principal outstanding.

The claim which is due for more than 90 days istermed as “SMA”. The 4 (four) types of past dueclaims are discussed below:Special Mention Accounts (SMA):

Theses assets need constant monitoring as it hasshown signs of weakness and the repaymentprospects of the borrower may decline if no effort isexerted to regularize the accounts.Sub-Standard (SS):The repayment of the loan has been put in doubt butthe recovery is not unlikely.Doubtful (DF):There is less possibility of recovery of the overdueamount and probability of loss is high.Bad/Loss (B/L):

These are the loans which have almost turnedunrecoverable.Bank has a separate Monitoring Department namedby Recovery Division which is assigned withmonitoring &Recovery of classified loans.

b) Description of approaches followed forspecific and general allowances andstatistical methods;

Risk management in the banking sector is a keyissue linked to financial system stability. In a modernfinancial institution risk management is a complexand constantly evolving task with focus on threecritical elements: risk identification, strategies tomitigate or manage risk, and the development of aformal risk management framework, whichincorporates the first two elements.The essential elements of an effective riskmanagement framework are:

* Clearly defined management responsibilities andaccountability.* Clear separation of responsibilities and reportinglines between risk management functions, businesslines and support functions to avoid conflict ofinterests.* Detailed risk controls for each business line* A comprehensive and independent internal auditor compliance process for reviewing an testinginternal controls and risk management system.* Strong risk governance and stewardship by theBoard, which demonstrates an understanding of allmajor risks.In accordance with the Bangladesh Bank Guidance

Notes, the bank has established a risk framework thatconsists of six core factors, i.e. (i) Credit Risk (ii)Asset and Liability/Balance Sheet Risk (iii) ForeignExchange Risk (iv) Internal Control and ComplianceRisk (v) Money Laundering Risk and (vi)Information and Communication Technology Risk.Effective risk management is indispensable forsmooth commercial operation in all spheres ofbusiness. So, Uttara Bank Ltd. has implementedabove mentioned risk management systemsprepared in line with guidelines of Bangladesh Bankto prevent relevant risks.

c) Discussions of the Bank’s credit riskmanagement policy.

Credit Risk is defined as the risk that arises from theuncertainties of counterparty’s ability to meet itsobligations to the Bank as they become due. Ourendeavor in identifying, measuring, monitoring andcontrolling credit risk for each borrower and also atthe portfolio level are working as the guidingprinciples of credit risk management. Uttara BankLimited always acknowledges effective RiskManagement as the key to steady and stable growthfor the Bank. The Bank's own lending policy hasbeen introduced in the Bank in line with thedirectives received from the Bangladesh Bank andthe Government. The Branches are the business unitof the banking system. The loan applicationassessment process starts at branch level by theRelationship Managers (RM) through zonal officeand ends at Credit Division, Approval Department,Head Office. The Credit Division Administrationand Monitoring Department analysis the proposalfrom different perspectives in line with lendingpolicy of the Bank. If the proposal is found businessworthy the Department places it to the CreditCommittee with its recommendations. Mentionablethat Credit approval authority has been delegated tothe individual executives. Proposal beyond theirdelegation is submitted to the Executive Committeeand the top management.

Quantitative Disclosure1. Industry wise segregation of loans & advances:

2. Geographical area basis distribution of loans and advances :

(Figure in crore)

Particulars (Taka in crore)Agricultural, fisheries and forestry 118.63Industry 498.85Construction 238.50Transport & communication 51.35Storage 2.53Business 4,394.16Consumer Financing 414.39Miscellaneous 764.57Total 6482.98

Name of the DivisionDhakaChittagongKhulnaBarisalRajshahiSylhetTotal

3. Credit risk Exposure

Tk3988.40

811.56461.95333.83711.05176.18

6482.98

Sl.1.

2.

3.

4.

5.

6.

7.6.16.26.3

8.8.1

ParticularsTotal Exposures of Credit RiskI) Fundeda) Domesticb)OverseasII) Non-Fundeda) Domesticb)OverseasHighest exposure to single sector (amount OS)-Trade ServiceTotal exposure to a single sector exceeds 10% of Gross credit ason 31.12.2013Residual contractual maturity breakdown of assets:Repayable on demand upto 1 monthOver 1 month but not more than 3 monthsOver 3 months but not more than 1 yearOver 1 year but not more than 5 years.Over 5 yearsTotal assetDistribution of risk exposure by claims* A. Claims on sovereigns and central BanksB. Claims on other official entitiesC. Claims on banks and securities firmsD. Claims on Corporate

E. Claims included in the retail portfolio & small enterprises

F. Claims secured by residential propertyG. Claims secured by commercial real estateH. Other Categories:

-Past due loans/NPL-Off-balance sheet items- Fixed Assets and Other Assets

Credit Risk Mitigation* Claims secured by financial collateral* Net exposure after the application of haircuts*Claims secured by eligible GuaranteeAmount of NPAs (Gross)SubstandardDoubtfulBad & LossNet NPAsNPA RatiosGross NPAs to gross advance

(Figure in crore)

5592.165592.16

-721.87721.87

141.65

747.36

2,348.831,576.022,204.892,663.064,445.75

13,238.555,592.16

--

348.60

2634.431567.31

202.00--

350.11-

489.71

357.0960.61

-

47.4797.65

375.83520.95

8.04%

0

9. Movement of NPAs (Gross)9.19.29.39.410.10.110.210.310.410.5

Opening balanceAdditionsReductionsClosing BalanceMovement of provisions for NPAsOpening balanceProvisions made during the periodWrite-off/Write-back of excess provisionsRecovery from write-offClosing Balance5 ) EQUITIES : DISCLOSURES FOR BANKING BOOK POSITION:

Qualitative Disclosures

516.1981.3776.61

520.95

138.8539.21

(76.61)-

101.45

The general qualitative disclosure requirementwith respect to equity risk including :a) differentiation between holding on which capitalgains are expected and those taken under otherobjectives including for relationship and strategicreasons and

b) Discussion of important policies covering thevaluation and accounting of equity holdings in thebanking book. This includes the accountingtechniques and valuation methodologies used,including key assumptions and practices affectingvaluation as well as significant changes in thesepractices.

All investment securities are initially recognized atcost, being fair value consideration given includingacquisition charges associated with the investment.Premiums are amortized and discounts accreditedusing the effective yield method and are taken todiscount income.

Important policies for EquitiesShare Capital:Ordinary shares are classified as equity when there isno contractual obligation to transfer cash or otherfinancial assets.Statutory reserve :Bank Companies act, 1991 requires the Bank totransfer to its Statutory Reserve Fund a sumequivalent to not less than 20% of its current yearsprofit before any money is transferred to theGovernment or any dividend is declared until suchreserve equals to its paid up capital.Investment:Investments are classified broadly in three categoriesand accounted for Held to Maturity, Held for Tradingand Sale and repurchase agreement. Besides Bank hasinvested in listed securities and unlisted securities

Value of investments has been enumerated as follows :

Investmentclass

TreasuryBill/ Bond

(HFT)Treasury

Bill/ Bond(HTM)

Debenture

Initial

recognition

Cost

Cost

Face

Measurement after

initialrecognition

Marketvalue

Amortisedvalue

None

Recording of changes

Loss to profit and lossstatement (P & L), gainto revaluation reserveIncrease in value toequity and decrease invalue to P & LNone

valuePrize bond Cost None None

Shares Cost Lowercost

ofand

Any loss, charged in P &L Unrealized gain, not

market recognized in accounts

Interest Rate Related instruments

Specific Market Risk on Interest Rate Related Instruments 1824.72 -General Market Risk on Interest Rate Related Instruments 1824.72 40.23

Sl Particulars Capital charge Amount (Market value)a) Specific Risk: 164.16 10.00% 16.42b) General Market Risk: 164.16 10.00% 16.42

Total 32.83

Qualitative Disclosuresa)

b)

View of BOD on trading/investmentactivities:

Methods used to measure Market Risk:

The portfolio of investment includes GovernmentTreasury Bills and Bonds, Prize Bonds, Shares of listedPublic Limited Companies etc. The bank has alwaysput impetus on investment of funds in high yield areasand also has ensured maintenance of statutoryLiquidity Requirements (SLR) as fixed by BangladeshBank.

Market risk is the possibility of losing assets in On-balance sheet and Off-balance sheet positions arisingfrom movements in market prices. Under market riskmanagement, interest rate risk, equity price risk andforeign exchange risks are monitored. Bank adoptedStandardized (rule based) Approach for measuringMarket Risks under Basel-II through Maturity GAPAnalysis, Sensitively Analysis, VAR and Mark toMarket. The total capital requirement in respect of

value

Quantitative DisclosureCapital Charge on Equities Figure in crore

6) INTEREST RATE RISK IN THE BANKING BOOK (IRRBB)Qualitative Disclosures

a) The general qualitative disclosure Interest rate risk is the risk where changes in market interestrequirement including the nature ofIRRBB and key assumptions, includingassumptions regarding loan prepaymentand behavior of non-maturity depositsand frequency of IRRBB measurement.

rates might adversely affect a Bank’s financial condition.

Changes in interest affect both the current earnings (earnings

perspective) as well as the net worth of the Bank (economic

value perspective). The Short term impact of changes in

interest rates is one the Bank’s Net Interest Income (NII).On a

longer term changes in interest rates impact the cash flows on

the assets liabilities and off balance sheet items, giving rise to

a risk to the net worth of the Bank arising out of all re-pricing

mismatches and other interest rate sensitive position.

Quantitative Disclosures(Figure in crore)

7) MARKET RISK:

Qualitative Disclosuresa)

b)

View of BOD on system to reduceOperational Risk:

Performance Gap of Executives and

Operational Risk is defined as the risk of loss resulting frominadequate or failed internal processes, people and systems orfrom external events. This definition includes legal risk, butexcludes strategic and reputation risk.

The Bank offers a competitive compensation package to the

employees based on performance and merit. The Bank has

Particulars (Figure in crore)

Interest Rate Risk 1824.72Equity Position Risk 164.16Foreign Exchange Risk 85.77

Commodities Risk 0.00

Applicable tax rate 42.50%

market risk the aggregate capital requirementcalculated for each of the risk sub-categories. For eachrisk category minimum capital requirement ismeasured in terms of two separately calculated capitalcharges for “specific risk” and “general market risk”

c)

d)

Market Risk Management System:

Policies and process for mitigating marketrisk:

Bank has its own Market Risk Management Systemwhich includes Asset Liability Risk Management(ALM), Foreign Exchange Risk Management undercore Risk Management Guidelines.

Detailed policies are operational for investmentManagement, Asset Liability Management and MarketRisk Management which deal in detail the variousstrategies and processes for monitoring Market Risk.Besides these following tools are used for market riskmanagement/mitigation.

i)Delegation of Powers: Bank has well-defineddiscretionary powers for different level ofauthorities of the Bank for taking investmentdecisions.

ii)Prudential Limits: Various limits such as exposurelimit, stop loss limits, duration etc. have beenfixed.

iii) Asset Liability Management Committee (ALCO):Under Risk Management architecture of BankALCO committee of executives is constituted andis monitoring management of liquidity and interestrate risk. ALCO support group ofexecutive/officers is constituted to support ALCO.

Quantitative Disclosures

8) OPERATIONAL RISK:

Operational Risk year-1 year-2 year-3 Capital ChargeGross Income 716.27 738.13 675.13 106.48

by the Bangladesh Bank.

Staffs: developed one of the finest teams of efficient and responsibleofficers with high ethical standards who are working in acongenial atmosphere.

c) Potential external eventsBank has own software named UIBS. As the Branches of theBank is computerized the Bank has alternative power supply (both EPS and generator) and networks lines to avoid businessdisruption and system failure. The Bank IT system does notallow any kind of external access to avoid external fraud byway of theft/hacking of information works, forgery etc.

d) Policies and processoperational Risk:

for mitigatingBank has put in place the following measures to control andmitigate operational risks:* Instructions, circulars, job descriptions, training

programmes etc. including Operational and otherManuals

* Delegation of financial powers at various levels of officersfor different type of financial transactions

* Inputs on operational risk are included in the relevanttraining programmes

* Bank has plan to keep provision for potential operationalrisks specially for ICT disruption.

* A system of prompt submission of reports on frauds is inplace.

e)The Bank has adopted Basic Indicator Approach (BIA) for

Approach for calculating Capital charge calculating capital charge for Operational Risk, as stipulatedfor Operational Risk:

Quantitative Disclosures

Capital Charge for Operational Risk (Basic Indicator Approach)

(Figure in crore )