financial system included several small jointventurebanks and a limited number of specialized financial institutions, such as the Foreign Trade Bank—which was mainly involved in the financing of external trade—and the State Development Bank—which largely operated with budgetary funds to finance state initiated investments.
This system was substantially changed on January 1, 1987. A two-tier banking system was established with the separation of the central and commercial banking functions of the NBH. Commercial bank operations of the NBH and the State Development
International Monetary Fund. Asia and Pacific Dept
types of banks (2.1–2.8 percent). Risks from asset quality for non-foreign exchange banks and foreign/jointventurebanks are mitigated by their high capital ratios (23 percent and 34 percent, respectively). State-owned banks outperformed in terms of profitability, with their ROA (3 percent) notably above the industry average (2.3 percent). Funding risk could become an issue for foreign/joint-venturebanks as their Loan-to-Deposit (LTD) ratios (131 percent) are significantly above the industry average (89 percent). Moreover, these banks rely more on non