Understanding risk, ensuring good governance and creating separate guidelines in the light of central bank policy are important for efficient risk management in banking sector, say experts.
They made the call at a workshop titled ‘Effectiveness of Risk Management Division of Banks-An assessment’ organized by Bangladesh Institute of Bank Management (BIBM) in the capital on Monday (Sept 16).
Deputy Governor of Bangladesh Bank and Chairman of BIBM executive committee SM Moniruzzaman was chief guest at the workshop, chaired by BIBM chair professor Barkat-e-Khuda. BIBM Director General (DG) Md Nazimuddin delivered the welcome speech.
BIBM Professor Md Nehal Ahmed and his team were presenting the research report in the workshop.
Bangladesh Bank (BB) Deputy Governor SM Moniruzzaman said that risk management in banks across the world changed substantially over the past decade.
“Stress testing emerged as a major supervisory tool, in parallel with the rise of expectations for bank risk-appetite statements. Banks also invested in strengthening their risk cultures and involved their boards more closely in key risk decisions,” said BB deputy governor.
SM Moniruzzaman pointed out that Bangladesh Bank undertook a lot of initiatives to streamline the risk management functions of banks while banks were also working very hard in this regard.
All banks have already formed risk management division for effective management of various risks, board risk management committee, executive risk management committee and chief risk officer, he mentioned.
“We have many comfort zones in terms of risk management. However, some risk indicators are still beyond regulatory expected level. Therefore, this research workshop is really a timely initiative to pinpoint the holes that need to be plugged in concerning risk management,” he added.
According to the research report, “Effective risk management program starts with the board and top management. However, in case of Bangladesh, the scenario is somewhat different. Here board and top management of the bank perceives risk management solely as a regulatory mandate, rather than as an important means of enhancing competitiveness and performance, which means they are less supportive to such efforts. Banks are yet to be habituated to risk-focused culture. This is important as banks with a strong culture of risk management and ethical business practices are less likely to experience potentially damaging risk events and are better placed to deal effectively with those events that do occur.”
BIBM supernumerary professor and former managing director of Pubali bank Helal Ahmed Chowdhury said that the bankers must manage efficiently because all types of loans were at risk.
He stressed strengthening the legal department.
Trust Bank Ltd Managing Director and CEO Faruq Mainuddin Ahmed said the risk in the banking sector was not avoidable but it was important to manage risk efficiently.
BIBM Professor Md Nehal Ahmed said that previously risk management was not strong in the country but now the situation improved much.
“Each bank should have its own policy in risk management,” he suggested.
BIBM former supernumerary professor Yeasin Ali, BIBM Professor and Director (Training) Shah Md Ahsan Habib spoke among others.