The board of directors and top management of banks are yet to understand the need of effective risk management programme as they consider it merely a regulatory mandate, according to a research report of Bangladesh Institute Bank Management.
The report was presented in a workshop on ‘Effectiveness of Risk Management Division of Banks-An assessment’, organised by BIBM in the capital on Monday.
BIBM professor Md Nehal Ahmed, who presented the research paper, said that ideally, effective risk management programme of banks started with the board and top management.
‘The scenario, however, is different in Bangladesh. Here board and top management of the bank perceive risk management solely as a regulatory mandate rather than an important mean of enhancing competitiveness and performance, meaning they are less supportive to such efforts,’ said the report.
Banks are yet to be habituated to risk-focused culture despite the fact that a strong culture of risk management and ethical business practices is less likely to experience potentially damaging risk events, it said.
The report said that the use of software was also considered important in improving effectiveness of risk monitoring in the industry best practices.
The research report said that the country’s banking sector had been suffering from acute dearth of bankers well-conversant with the techniques of risk management.
In the absence of skilled and knowledgeable human resources, managing risk becomes a difficult task which poses serious cause of concern for the banks, the BIBM study said.
Nehal said that each bank should have its own policy on risk management.
Bangladesh Bank deputy governor and BIBM executive committee chairman SM Moniruzzaman said, ‘Risk management in banks across the world has changed substantially over the past decade.’
The regulations that emerged from the global financial crisis triggered a wave of change in risk functions, he said.
The change in the functions included more detailed and demanding capital, leverage, liquidity, and funding requirements, as well as higher standards for risk reporting.
Moniruzzaman said that Bangladesh Bank had undertaken a lot of initiatives to streamline the risk management functions of banks.
BIBM supernumerary professor and former managing director of Pubali Bank Helal Ahmed Chowdhury mentioned that the first task in risk management was to identify the risk.
He stressed strengthening the legal department of banks.
Trust Bank managing director and chief executive officer Faruq Mainuddin Ahmed said that the risk in the banking sector could not be avoided rather it was important to manage risk efficiently.
BB executive director and BIBM director general Md Nazimuddin, chair professor Barkat-e-Khuda, supernumerary professor Yeasin Ali and professor and director Shah Md Ahsan Habib, among others, spoke at the event.
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