A comprehensive new regulatory guideline comes with policy prescription for strengthening risk governance and improving internal-control standards across Bangladesh's banking sector, now under a rejig process.
The Bangladesh Bank Tuesday issued the new guideline on the Internal Control Management System (ICMS) to that end.
The ICMS guideline has been aligned with the latest Global Internal Audit Standards and the Basel Core Principles for Effective Banking Supervision.
"A sound and effective ICMS is essential to ensuring the safety, stability and resilience of the country's banking sector," the central bank has said in its edict.
"In an increasingly complex financial environment marked by rapid technological transformation, diversified financial products, evolving risk dynamics and heightened regulatory expectations, banks must establish robust governance and control frameworks to safeguard depositors' interests and maintain public confidence," it added.
The guideline provides a comprehensive framework for strengthening internal-control systems in banks.
This set replaces the Guidelines on Internal Control and Compliance in Banks issued in September 2016, and incorporates contemporary international best practices in governance, risk management, compliance, internal audit, data analytics, Shariah audit, information systems audit and modern control mechanisms.
The new framework formally adopts the Three Lines of Defence model, strengthens the independence and accountability of internal audit and compliance functions, and reinforces the oversight role of banks' boards of directors and senior management over internal- control processes.
According to the guideline, the objective is to establish minimum standards for internal-control management applicable to all scheduled banks operating across Bangladesh, including conventional banks, Islamic Shariah-based banks, and Islamic banking branches and windows.
The central bank encourages banks to adopt more advanced control frameworks in line with their size, operational complexity and risk profile, while ensuring full compliance with the minimum regulatory requirements.
Banks have also been advised to review their existing internal- control architecture and take the necessary steps to align their governance, risk management and supervisory reporting systems with the new guideline.
The central bank expects effective implementation of the guidelines to strengthen "compliance culture", improve operational efficiency, enhance transparency and reporting quality, mitigate emerging risks, and support the stability and sustainable growth of the banking sector.
jasimharoon@yahoo.com
