1 Preparation of banks in implementing Basel III Prashanta K Banerjee As part of a consistent journey to enhance the loss absorption capacity and resilience of the banks through increasing the capital and improving the quality thereof, Bangladesh Bank has given directions to banks to implement Basel III from January 01, 2015 in phases and fully by January 01, 2019. As Basel III framework was basically the response of the global banking regulators to deal with the factors, more specifically those relating to the banking system that led to the global economic crisis or the great recession, Basel Ill provides improved risk management systems in banks. By practising these risk management systems, banks therefore are expected to be more shock absorbent in future. Any change, big or small, of whatever nature brings some challenges. So it is expected that Bangladeshi banks will face several challenges to implement Basel III. But we are convinced that challenges are not onerous and these are worth facing up to. The first and foremost challenge is to maintain the increased amount of capital. As per the guidelines of Bangladesh Bank, banks maintained 10 percent of risk- weighted asset in 2015, but gradually it will go up and finally banks will maintain 12.50 percent in 2019 when full implementation of capital ratios will be executed. Besides, banks need to maintain leverage ratio of 3 percent based on amount of Tier- capital as percentage to total exposure of banks. Seemingly, private commercial banks (PCBs) are capable of increasing these percentages comfortably. However, the recent deterioration of asset quality of state-owned commercial banks (SCBS) and some PCBs has created uncertainty about their capacity to generate capital internally. In this perspective, banks can initiate to amplify their internal ability for generating capital through reducing costs, ensuring quality of loans and forming loan portfolio contemplating the risk weights fixed by Bangladesh Bank. In case of necessity of adding capital from external sources, the government may follow traditional trajectory through injecting new capital to SCBs for ensuring sufficient amount of capital. PCBs may also go for issuing seasoned issues for extra amount of capital from external sources. Additionally, banks can raise the amount of capital by offloading a certain percentage of shares, inviting organisations like International Finance Corporation (IFC), and Islamic Corporation for the Development of the Private Sector (ICD) for participation in banks! capital and issuing different debt securities