All banks should have risk management units: Atiur

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FE Report
Bangladesh Bank governor Dr. Atiur Rahman Saturday recommended establishment of a separate "risk management unit" in every bank and financial institution to address and mitigate the potential business risks.
"This risk management arm, which should be headed by a top risk management specialist, will be responsible for analysing and weathering any potential business risk in financing," he told a gathering of the country's top bankers in the city.
The central bank governor was speaking at a roundtable discussion on the "Global Financial Crisis and Corporate Governance: Lessons and Way Forward for the Banking Sector in Bangladesh". Bangladesh Enterprise Institute (BEI) organised the programme.
"This specialised wing, which will act as a separate unit within every bank's organogram, will provide the banks cushion against any financial crisis at micro and macro level while insulating the institutions as well as the overall economy from extensive damage," Dr. Atiur said.
Earlier, Bangladesh Bank has formulated core risk management guidelines that address the five major areas of risks, including credit risk, foreign exchange risk, asset-liability risk, internal control and compliance and money laundering.
"The ongoing global economic downturn, which has its roots in major collapse in the financial sector overseas, has accentuated the need of such specialised risk management arm in banks and financial institutions," the central bank governor added.
"An important agenda for Bangladesh Bank at present is to make major overhaul in its risk management policies and practices in line with Basel II," Dr. Atiur said, adding: "Under that framework, credit rating is to be determined on the basis of risk profile assessed by external credit assessment institutions." The BB governor also asked the banks to comply with the core risk management guidelines and other central bank policies instituted lately to insulate the country from the current global economic downturn.
Referring to the Bangladesh Bank measures initiated to fend off the crisis, the BB boss mentioned the introduction of single borrower exposure limit and the implementation of stress testing programme and Basel II.
"Enhanced and more demanding accounting and disclosure requirements including revised formats of balance sheet and profit and loss accounts have been introduced to bring more transparency," Dr. Atiur said.
"Minimum capital requirements have also been raised while monitoring of problem banks have been strengthened and those showing exhibiting weaknesses and deteriorating trends have been brought under early warning system," he added.
Earlier speakers at the roundtable gave emphasis on the importance of good corporate governance (CG) practices for the banking sector of Bangladesh, particularly in the context of the global financial downturns
Chairman of Securities and Exchange Commission (SEC) Md Ziaul Haque Khondker in his speech said: "SEC is working with Bangladesh Bank to ensure market discipline in a bid to bring in more stability in the market and help investors in making their investment,"
"We are also working with Institute of Chartered Accountants of Bangladesh (ICAB) to make major development in the format and the content to be disclosed in the off-balance sheet items," he added.
Khondker also stressed on the formulation of guidelines for the independent directors, adding that SEC is currently working on preparing a list of independent directors.
Dr. Mirza Md. Azizul Islam, the former advisor who presented the keynote speech at the event said: "The great lesson from the present global economic crisis is that the risk management system in the financial sector should be strengthened through a more effective early warning system, which will scrutinise risks beforehand and come up with the remedial measures."
He also suggested diversification and expansion of asset base securities while identifying effective ways to reduce bank expenditure, and stressed on protecting the interest of the depositors.
Chairman of BRAC Bank Ltd. Muhammad A Rumee Ali and Managing Director of Mutual Trust Bank Anis A. Khan as well as a number of top bankers and executives also joined the roundtable discussion. President of Bangladesh Enterprise Institute Farooq Sobhan presided over the meeting.