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Group Profile
Name ID
1 Credit Risk
Risk is inherent in all aspects of a commercial operation, however for
Banks and financial institutions, credit risk is an essential factor that needs
to be managed.
Policy guidelines
Preferred organizational structure & responsibilities
Procedural guidelines
2 Asset and Liability/ Balance Sheet Risk
Asset and liability management is the most important function of Bank
management. Asset Liability Management ensure balanced fund
mobilization and their deployment with respect to their maturity profile,
cost, yield as well as risk exposure.
Loan Deposit Ratio (LD)
Wholesale Borrowing Guidelines (WBG)
Core Risk Management
Commitments
Medium Term Funding Ratio (MTF)
Maximum Cumulative Outflow
Liquidity Contingency Plan
Local Regulatory Compliance
3 Internal Control & Compliance Risks
Internal control is the process, effected by a company's board of directors,
management and other personnel, designed to provide reasonable assurance
regarding the achievement of objectives in the effectiveness and efficiency
of operations, the reliability of financial reporting and compliance with
applicable laws, regulations, and internal policies
Organization Structure
Process Guidelines
Internal Control Process
Core Risk Management
4 Money Laundering Risks
Properties acquired or earned directly or indirectly through illegal means.
Illegal transfer, conversion, concealment of location or assistance in the
above act of the properties acquired or earned directly or indirectly through
legal or illegal means.
Identification procedures
Anti-money laundering processes
5 Foreign Exchange Risks
The globalization process has made the foreign exchange market a worldwide
network. The market is open around the clock and follows the sun around the
globe with the help of communication satellites. There is none statutory
international body that regulates the activities of foreign exchange market.
Therefore, it has been emerged as a self-regulated market.
Policy
Organizational structure
Process
Core Risk Management
6 It risks
Information technology (IT) plays a critical role in many businesses. IT
risks include hardware and software failure, human error, spam, viruses and
malicious attacks, as well as natural disasters such as fires, cyclones or
floods.
7 Environment risk
Environmentally Derived Risks for the Bank:
Inability of the client to make payments due to unexpected
environmental costs.
Over valuation of assets offered for security
Decrease in the value of security due to environmental impairment
during the term of the investment.
Legal liability for clean-up.
Loan Classification and Provisioning Rules
All loans and advances will be grouped into four (4) categories
(a) Continuous Loan (b) Demand Loan (c) Fixed Term Loan and (d) Short-term
Agricultural & Micro- Credit.
Provisioning Rules
General Provision: Banks will be required to maintain General Provision in the
following way:
@ 0.25% against all unclassified loans of Small and Medium Enterprise (SME)
as defined by the SME & Special Programmes Department of Bangladesh
Bank from time to time and @ 1% against all unclassified loans (other than
loans under Consumer Financing, Loans to Brokerage House, Merchant Banks,
Stock dealers etc., Special Mention Account as well as SME Financing.)
@ 5% on the unclassified amount for Consumer Financing whereas it has to be
maintained @ 2% on the unclassified amount for (i) Housing Finance and (ii)
Loans for Professionals to set up business under Consumer Financing Scheme.
@ 2% on the unclassified amount for Loans to Brokerage House, Merchant
Banks, Stock dealers, etc.
Loan Classification and Provisioning Rules
@ 5% on the outstanding amount of loans kept in the 'Special Mention
Account'.
@1% on the off-balance sheet exposures. (Provision will be on the total
exposure and amount of cash margin or value of eligible collateral will
not be deducted while computing Offbalance sheet exposure.)
Specific Provision: Banks will maintain provision at the following rates in
respect of classified Continuous, Demand and Fixed Term Loans:
Sub-standard: 20%
Doubtful: 50%
Bad/Loss: 100%
Provision for Short-term Agricultural and Micro-Credits:
All credits except 'Bad/Loss' (i.e. 'Doubtful', 'Sub-standard', irregular and
regular credit accounts): 5%
'Bad/Loss: 100%
Credit Information Bureau (CIB)
Credit Information Bureau (CIB) is a credit record of an individual, which
contains the repayment history of liability. The CIB is generated from central
bank of a country. In the previous time, the CIB was generated manually but
now a day it is generated through online from the server of Central Bank. In
manual process it was a lengthy process which took about 15 to 20 days to
generate, but now it requires only few seconds.
CIB (Credit Information Bureau) Process
File receiving from Branch/DST with CIB inquiry and Undertaking form
Log-in to Bangladesh Bank CIB online Module/Server (www.bbcib.org.bd)
Applicants Information input to the Bangladesh Bank CIB online Module
or Server
1 Contract Data:
2 Subject Data (Borrower/Co-Applicant/Guarantor)
Receiving the PDF document from Bangladesh Bank CIB online server
Analyze the Loan Status
Guidelines for loan rescheduling
Legal action against borrower is the last weapon bank uses to recover
dues. But in most cases, legal environment in Bangladesh becomes a
barrier instead of being helpful to recover bank dues. The commercial
law dealing with loan recovery overwhelmingly favors the delinquent
customers. The legal system makes it difficult for the NCBs to
repossess and sell many securities (LRA Manual, 1-2). The borrowers
are confident that they would not be touched for at least 10-15 years
due to cumbersome, inefficient and time consuming procedural law,
over burdened judges and most of all, ingenuity of their lawyers in
adopting dilatory tactics. Bangladeshi legal system provides an
elaborate system of appeals, reference, reviews and revisions, which
causes abnormal delays in the legal process. Present scenarios of legal
environment will discuss in the following subsections
Present Status of Law Relating to Recovery of Loans