BB asks banks to follow core risk-management guidelines

---

Shafiqul Islam Jibon
The Bangladesh Bank (BB) has asked the commercial banks to reduce their dependence on call money market through borrowing fund from it on a higher rate of interest, bank sources said.
In a letter sent last week to the banks, the BB said, the banks must follow the guidelines of the core risk-management to avoid recurrence of the financial scam like the one involving Hallmark Group.
The BB said all commercial banks should be cautious and take lessons from the Hallmark case linked mainly to the state-owned Sonali Bank.
Under the international banking standard, the BB has identified the six core areas of risk-management which are related to banking operations and issued necessary guidelines in those areas.
The core risks are: 'Credit Risk', 'Asset and Liability or Balance Sheet Risk', 'Foreign Exchange Risk', 'Money Laundering Risk', 'Internal Control and Compliance Risk' and 'Information and Technological Risk'.
Basing on such guidelines, the BB has asked the commercial banks to develop an appropriate system and method on their own to manage the core risks in their day-to-day banking operations, the letter stated.
But on an urgent basis the banks must reduce their dependence on inter-bank call money market through the practice of borrowing fund at a higher rate of interest, it also noted.
Furthermore, the banks have to follow the credit-deposit ratio properly as per the guideline of the central bank. The current credit-deposit ratio of a few commercial banks stands at about 100 per cent or even more, increasing their financial risks, the letter noted.
As the financial risks are many, the banks are not able to maintain their CRR (cash reserve requirement) with the BB. The higher lending beyond their actual level of deposit has made this problem a part of their liquidity management, the BB letter pointed out.
The credit-deposit ratio should remain below 81 per cent as the banks are required to maintain SLR (statutory liquidity ratio) by 19 per cent -- 13 per cent in the form of government securities and 6.0 per cent in cash against their deposits, with the BB.
"However, most commercial banks now are not capable of maintaining their CRR with the BB as they have been facing liquidity problem for a long time. But it will be solved if the respective banks put in efforts for mobilising their deposits and proper management of treasury operations, mobilisation," a senior official at the BB told the FE Sunday.
All commercial banks of the country have also been notified about the power and jurisdictions of the central bank as per the BB's Order 1972, the Banking Company Act 1991 and Money Laundering Prevention Act (MLPA) 2012.
If any bank fails to maintain the BB's guideline regarding their risk management, capital adequacy, credit and deposit ratio, CRR and negligence in payment of import or any kind of foreign bills, the central bank will take action as per rules, the letter said.
The BB official said the recent financial scandal involving the Hallmark Group has opened the eyes of all. The BB would not tolerate further such incidents in any bank of the country, he added.
"The central bank has the right to take legal actions itself in some cases against the culprits as per the country's MLPA 2012," he mentioned.
Under this Act, the BB's Financial Intelligence Unit (FIU) is able to cope with any type of financial fraudulence, money laundering and financial crime by individuals or institutions in the country.
"The FIU may also provide or seek such information from the overseas organisations to control any financial crime," he said.
The Act has also given power to BB officials to file legal actions with the court against financial criminals. And the FIU is currently working in that direction to find out financial crimes in the country.