Risk Management Practice in City Bank Limited

Risk Management Practice in City Bank Limited

The economy of Bangladesh has always been in a turmoil state since commencement. However, the instigation of privatized commercial banks has laid down a milestone in the development of the country‟s economy. Today there are 39 Private Commercial Banks (PCBs) competing head to head with the 4 State Owned Commercial Banks (SOCBs), 4 Specialized Bank, 9 Foreign Commercial Banks (FCBs) and 31 Financial Institutions. But this did not happen right away.

Generations went by to reach this state of competitive market scenario. The City Bank Ltd. Is one of the first generation Commercial Banks to operate in Bangladesh. It started its voyage on 27th March, 1983 and now retains its crown among the five oldest Commercial Banks in the country.

The journey of this bank started with only 34 million taka worth of capital in an office at B.B.

Avenue in Motijheel. The startup capital was obtained from the promoters but subsequently the argument of issuing share capital arose and through formal registration as a schedule bank the organization commenced at the latter phase of first quarter of 1983. Taka 100 million was authorized to the company as capital of which 14 million was paid up back then and after that the path to greatness never went dark.

At genesis the bank used to follow traditional and orthodox banking methods, formally known as the decentralized banking model. However, it underwent massive restructuring in 2007 and implemented centralized business model with a new management team taking over under the leadership of its new CEO Mr. Mahmood Sattar, serving its customers through 4 distinct business divisions namely,

• Corporate & Investment Banking
• Retail Banking
• SME Banking
• Treasury and Market Risks

The focus of this transformation project was on improving the overall quality of assets, relaunching the brand anew, leveraging the technology potential, improving the quality of products offered and placing higher benchmarks for customer service. Mr. Sattar spearheaded several innovative initiatives to turn the bank into a modern financial supermarket using the latest technologies. Consequently, under his watchful eyes the bank won the ‘Best Bank in Bangladesh for 2012’ award by FinanceAsia for adopting global best practices by doing away with age-old traditional decentralized banking model and culture. That was the first year of FinanceAsia’s extending the award into local bank category in Bangladesh. Besides winning that prestigious award, City Bank also received “The Strongest Bank in Bangladesh award” in 2010 from The Asian Banker, “American Express Marketing Award” for Outstanding New Card launch in 2010 from American Express, “MoneyGram International’s Best Corridor Collaboration – South Asia” award in 2011 recognizing the inward remittance growth and the ISO 9001:2008 certification from Moody International, for its entire back end and technology operations. Later on the Bank went through rigorous checks and due diligence undertaken by IFC which made it an IFC (International Finance Corporation) client, ensuing it to become the fourth of its kind in the entire banking industry of the nation.

The Board of Directors of the City Bank Limited in an Extraordinary General Meeting held on 17th November, 2011 elected its Director Rubel Aziz as Chairman of the bank who took up charge from 1st December of the same year. Rubel Aziz is Managing Director of a number of Partex Group companies including Partex Beverage, Partex Jute Mills, Partex Plastics, Partex Accessories and Director of Amber Cotton Mills, Partex Sugar Mills, Partex Denim Ltd. Among many other leadership positions held by him in the corporate sector, he is also the Chairman of Janata Insurance Company Ltd., Director of IDLC Finance Ltd., Vice Chairman of ITCL (QCash) Ltd. He was also the President of Gulshan Club. Under his leadership the bank opened eight new branches up to date, received the “FinanceAsia’s Best Local Bank 2012 award”, offered home loan service, signed several new profitable business agreements, took part in reasonable CSR activities and inaugurated a whole new range of services like city gems priority banking service, city touch internet banking service and so on.

On the 3rd of November year 2013, Sohail R. K. Hussain took charge in City Bank as Managing Director & CEO. His contribution can be justly articulated from the 4 awards won by the organization during 2014 namely, ACCA’s Achievement Award, ‘Best Bank in Bangladesh’ award from Euromoney, second time ‘Best Commercial Bank in Bangladesh’ award from FinanceAsia and ‘Best Consumer Internet Bank in Bangladesh’ award from Global Finance.

Since the very inception The City Bank Limited is working with the philosophy of serving the nationals as an ideal and unique financial house. The golden pages of history give testimony of that very truth.

Current Situation

City Bank is one of the oldest private Commercial Banks operating in Bangladesh. It is a top bank among the oldest five Commercial Banks in the country which started their operations in 1983. The Bank started its journey on 27th March 1983 through opening its first branch at B. B.

Avenue Branch in the capital, Dhaka city. It was the visionary entrepreneurship of around 12 local businessmen who braved the immense uncertainties and risks with courage and zeal that made the establishment & forward march of the bank possible. Those sponsor directors commenced the journey with only Taka 3.4 crore worth of Capital, which has now exceeded their wildest imaginations.

City Bank is among the very few local banks which do not follow the traditional, decentralized, geographically managed, branch based business or profit model. Instead the bank manages its business and operation vertically from the head office through 5 distinct Units namely

• Business Unit
• Branch Banking
• Risk Unit
• Operations Unit
• Support

Under a real-time online banking platform, these 5 distinct Units are supported at the back by a robust service delivery or operations setup and also a smart IT Backbone. Such centralized business segment based business & operating model ensure specialized treatment and services to the bank’s different customer segments.

The bank currently has 104 online branches and 1 SME service centers and 11 SME/Agri branch spread across the length & breadth of the country that include a full fledged Islami Banking branch. Besides these traditional delivery points, the bank is also very active in the alternative delivery area. It currently has 240 ATMs of its own; and ATM sharing arrangement with partner banks that has more than 1150 ATMs in place; SMS Banking; Interest Banking and so on. It already started its Customer Call Center operation.

City Bank is the first bank in Bangladesh to have issued Dual Currency Credit Card. The bank is a principal member of VISA international and it issues both Local Currency (Taka) & Foreign Currency (US Dollar) card limits in a single plastic. VISA Debit Card is another popular product which the bank is pushing hard in order to ease out the queues at the branch created by its astounding base of some 400,000 retail customers. The launch of VISA Prepaid Card for the travel sector is currently underway.

City Bank is the local caretaker of American Express and is responsible for all operations supporting the issuing of the new credit cards, including billing and accounting, customer service, credit management and charge authorizations, as well as marketing the cards in Bangladesh. These are international cards and accepted by the millions of merchants operating on the American Express global merchant network in over 200 countries and territories including Bangladesh. City Bank also has exclusive privileges for the card members under the American Express Selects program in Bangladesh. This entitles any American Express card members to enjoy fantastic savings on retail and dining at some of the finest establishment in Bangladesh. It also provides incredible privileges all over the globe with more than 13,000 offers at over 10,000 merchants in 75 countries.

City Bank prides itself in offering a very personalized and friendly customer service. It has in place a customized service excellence model called CRP that focuses on ensuring happy customers through setting benchmarks for the bank’s employees’ attitude, behavior, readiness level, accuracy and timelines of service quality.

City Bank is one of the largest corporate banks in the country with a current business model that heavily encourages and supports the growth of the bank in Retail and SME Banking. The bank is very much on its way to opening many independent SME centers across the country within a short time. The bank is also very active in the workers’ foreign remittance business. It has strong tie-ups with major exchange companies in the Middle East, Europe, Far East & USA, from where thousands of individual remittances come to the country every month for disbursements through the bank’s large network of branches and SME service centers.

The current senior management leaders of the bank consist of mostly people from the multinational banks with superior management skills and knowledge in their respective “specialized” areas. This will surely prove to be fruitful in the years to come.

Facts and Figures

Deposit growth rate has increased by 14.24% from 94099 million in 2012. This mean, people are getting depositing more money in the bank. This is very good indicator for the bank. Loan growth rate has increased by 7.86% from 83333 million in 2012, which is a very good indicator for the bank.

During FY13, revenue collection was 95.3% of the annual budgeted amount which was Tk.1396.7 billion and almost equal to the target. The revenue collection in the revised FY13 budget is increased by 21.8% over the actual FY12 revenue. The tax revenue which constitutes 83.6% of the total revenue receipts increased by 22.7% compared to 19.7% growth in FY12. The non-tax revenue displayed lower growth rate of 17.4% in the FY13 compared to 44.8% increase in the preceding fiscal year. The total revenue receipts as percentage of GDP rose to 13.5% in FY13 compared to 12.5% in FY12.

During 2013, City Bank earned BDT 13,613 million as interest income, recording a growth of BDT 1,170 million (9%) over previous year. The growth in interest income was attributable to real growth in overall asset portfolio and efficient utilization of fund. Interest/profit paid on deposits and borrowings during 2013 was BDT 8,593 million, an increase over 2012 by BDT 921 million (12%). Interest expenses increased due to the increment of deposit volume by 13,398 million and increase of cost of deposit. Net Interest Income (NII) during the year was recorded at BDT 5,019 million, recording a growth of BDT 249 million or 5% over 2013. This growth was due to a combination of efficiencies achieved both in interest income and interest expense.

Profit After tax (PAT) of the bank stood at BDT 911 million in 2013 compared to BDT 763 million in 2012, 19.4% growth over last year. PAT has increased by BDT 148 million despite the lower operating income and lower provision requirement due to strong recovery effort.

Services of CBL

The principal activities of the Bank are to provide all kinds of commercial banking, consumer banking trade services, custody and clearing to its customers through its branches in Bangladesh. City Bank is among the very few local banks which do not follow the traditional, decentralized, geographically managed, branch based business or profit model. Instead the bank manages its business and operation vertically from the head office through 4 distinct business divisions.

• Corporate & Investment Banking
• Retail Banking (including Cards)
• Treasury & Market Risks
• SME Banking

Under a real-time online banking platform, these 4 business divisions are supported at the back by a robust service delivery or operations setup and also a smart IT Backbone. Such centralized business segment based business & operating model ensure specialized treatment and services to the bank‟s different customer segments

Corporate Banking

This division of CBL mostly deals with deposits and loans from corporations or large businesses, as opposed to normal individual members of the public (retail banking). The functions of the corporate division may include the following tasks:

• Working Capital Finance
• Trade Finance
• Short/Mid-Term Finance
• Project Finance
• Islamic Banking

City Manarah – Islamic Banking was introduced to guide and manage finances in a fully Islamic Shariah Compliant way. It offers a wide variety of deposit and investment products.

• SME Deposit
• SME Loan
• Foreign Exchange (Local & G7)
• Money Market
• Corporate Sales
• ALM & Market

Each account is designed to meet financial needs with best value of money. City Manarah includes services such as,

• Manarah Current Account
• Manarah Savings Account
• Manarah Term Deposit Receipt
• Manarah Hajj Deposit Scheme
• Manarah Deposite Rate
• Schedule of Charges
• Structured Finance
• Cash Management
• Investment Banking
• Schedule of Charges
• Interest Rate on Lending

Retail Banking

Retail banking includes the tasks for the following purposesDeposits

• Current Account
• Savings Account
• City Onayash
• City Shomridhdhi
• City Projonmo
• City Ichchapurun
• Student Saving Account School Plan
• FDR

Loans

• City Drive
• City Solution
• City Express
• City Double
• City Scholar

Cards- Debit Card, Credit Card etc.

• Visa Debit Card
• Master Debit Card
• Amex Credit Card
• Visa Credit Card

NRB- Foreign Remittance

• Medical File
• Student File
• Remittance

SME Banking

SME Banking of City Bank is assuming a new and modern dimension. It is entering in to a wider horizon. The philosophy of extending banking services to SME’s of the country is to meaningfully push every one of them up to the next level of respective business operations. The upward push would be meaningful as they would be business wise competitive for a sustainable future. It is therefore would be turning in to an abode of SME’s to grow to the next level. Hence, the bank has named it City Business – for taking SME’s to the next level. CBL‟S SME-S banking is engaged of servicing for the following facilities

• City Muldhan
• City Munafa
• City Shulov
• City Sheba- Service Purpose
• City Nokshi
• City Long Term Against Mortgage Loan
• City Agri :City agri includes the following service
• City Khamar
• City Shosho
• City Livestock
• City Jantrapati

City Bank Treasury and Market Risk Division

City Bank has a dedicated Treasury team who is capable of providing all treasury Solutions. Through our foreign correspondent business partners CBL is providing a wide range of Treasury products. In CBL Treasury, there are four teams who are specialized in their own area to ensure the best possible solution to our customer requirement. CBL has following teams in the Treasury:

• Foreign Exchange (Local & G7)
• Money Market
• Corporate Sales
• ALM & Market Research

Functions of Credit Risk Management (CRM) Department at City Bank

• Loan administration
• Loan disbursement
• Project evaluation
• Processing and approving credit proposals of the branches
• Documentation, CIB (Credit Information Bureau) report etc.
• Arranging different credit facilities
• Providing related statements to the Bangladesh Bank and other department

Risk Management Practice in CBL

Summery

The practice of calculating, disclosing and controlling or mitigating risks arising from a bank‟s day to day activities; such as, providing foreign currency, credit issuing, customer care, information system maintenance, internal control and compliance, asset-liability management, oversight of the board of directors, communication within departments and documentation. The City Bank Ltd. being one of the first generation banks is compelled to maintain their reputations by maintaining the risks arising from such activities. This study looks into these matters and provides an over view of the total risk management practice in this bank, finally disclosing the findings and necessary recommendations.

Objective

Broad Objective

The broad objective of this study is to analyze the evaluation on risk management practices of The City Bank Limited.

Specific Objectives

• To give an overview on City Bank and its Risk Management System.
• To compare the performance of the bank with prudential regulations of Bangladesh Bank.
• Finding out the shortcomings of the Bank in operations and providing some suggest remedial measures for its development.

Overview of Risk Management Practice

Risk Management in Banks

An efficient and healthy banking system is a prerequisite for sustainable economic growth of a country. In this context, effective risk management practices enable the banking industry to build public trust and confidence in the institutions which is necessary for mobilizing private savings for investment to facilitate economic growth. On the flip side, inadequate risk management practices in the banking industry would result in bank failures leading to erosion of public confidence in the industry having adverse implications for the economic growth. Therefore, an effective risk management framework is a prerequisite for banks to achieve their own business objectives and also play their role in the economic growth of the country.

Risk Areas

Risks are considered warranted when they are understandable, measurable, controllable and within a banking company’s capacity to readily withstand adverse results. Sound risk management systems enable managers of banking companies to take risks knowingly, reduce risks where appropriate and strive to prepare for a future, which by its nature cannot be predicted with absolute certainty.

Risk management is a discipline at the core of every banking company and encompasses all activities that affect its risk profile. Banks should attach considerable importance to improve the ability to identify measure, monitor and control the overall risks assumed. Risk management is very important especially when the banks are dealing with multiple activities, involving huge funds having both local and international currency exposure.

Banking companies in Bangladesh, while conducting day-to-day operations, usually face the following major risks:

Credit risk

The risk of loss arising from a borrower‟s probable failure to repay loan is called credit risk. This risk arises whenever a borrower considers paying current debt with future cash flow. In organizations credit risks are evaluated in two ways. These are discussed below,

Individual client wise

Credit Risk Management Division considers the risk on a case to case basis. Their sole purpose is to measure the weighted risk of individual clients and disburse loans accordingly.

Portfolio wise

The credit section of Risk Management Division considers the risk on a sector to sector basis or on industry to industry basis. This is what is referred to as portfolio wise credit risk management.

Market risk

The possibility of experiencing losses due to the factors that affect the overall performance of the financial markets is called market risk. Market risk, also called “systematic risk,” cannot be eliminated through diversification, nevertheless it can be evaded. The risk that a major natural disaster will cause a decline in the market as a whole is an example of market risk. Other sources of market risk include recessions, political turmoil, changes in interest rates and terrorist attacks.

This sort of risk is evaluated by the market risk section of the Risk Management Department. Market risk can be divided into 3 types. These are discussed below,

Interest rate risk

The risk that an investment’s value will change due to a change in the absolute level of interest rates, in the spread between two rates, in the shape of the yield curve or in any other interest rate relationship is called interest rate risk. Such changes usually affect securities inversely and can be reduced by diversifying or hedging.

Foreign exchange risk

The risk of an investment’s value changing due to changes in currency exchange rates is called Foreign Exchange Risk. This type of risk is also known as “currency risk” or “exchange-rate risk”.

Capital market investment risk

The risk associated with investment in shares. This type of risk can be defined as the probability or likelihood of occurrence of losses relative to the expected return on any particular investment in the capital market.

Operational risk

Operational risk is the risk that is not inherent in financial, systematic or market-wide risk. It is the risk remaining after determining financing and systematic risk, and includes risks resulting from breakdowns in internal procedures, people and systems. This risk is dealt by the operational risk section of the RMD.

Documentation risk

The probability of loss that arises from a legal agreement being incomplete, insufficient, or otherwise unenforceable is called documentation risk. This risk is dealt by the operational risk section of RMD, CAD and RFC.

Concentration risk

Probability of loss arising from heavily irregular exposure to a particular group of counterparties is called concentration risk. This type of risk is calculated and dealt by capital risk section of RMD.

Liquidity risk

The risk stemming from the lack of marketability of an investment that cannot be bought or sold quickly enough to prevent or minimize a loss is called liquidity risk. This type of risk is maintained by market risk section of RMD, Finance Department and the Treasury Department.

Reputational risk

A threat or danger to the good name or standing of a business or entity is called reputational risk. This risk is managed by the operational risk section of RMD.

Strategic risk

A possible source of loss that might arise from the pursuit of an unsuccessful business plan is called strategic risk. This is a part of the risk governance incorporated with top level management.

Environmental risk

Actual or potential threat of adverse effects on living organisms and environment by effluents, emissions, wastes, resource depletion, etc., arising out of an organization’s activities is called environmental risk. This risk is managed by Credit Risk Management and the Green Banking Cell.

Risk Management Practice in Bangladesh

Risk management in banking sector of Bangladesh is a relatively newer practice, but has already shown to increase efficiency in governing of these banks as such procedures tend to increase the corporate governance of a financial institution. After implementation of Basel committee, it is guiding the world‟s banking sector regarding risks issue. Like other countries central banks, Bangladesh is following various Basel pact viz. Basel-I, Basel-II and others core risk guide-lines implemented by Bangladesh Bank.

Subsequent implementation of core risk management guidelines by Bangladesh Bank, All banks of Bangladesh are following these guideline properly and some of our banks has already established separate division namely RMD ( Risk Management Division) headed by CRO (Chief Risk Officer). Some banks has tighten their risk management policy especially credit risk establishing through setting up CRM (Credit Risk Management) Division. Some banks are following centralized banking model from Branch based banking model and separated their  business unit from credit approval unit. Though some of our foreign banks like, SCB, HSBC, Citi NA has been following these tighten risk management system from earlier.

In spite of various risk management measures and tools that have undertaken by different banks, some financial scams have been occurring in different banks. Due to commodity price fluctuation risk some of the groups from Chittagong have already lost their money and are struggling to survive in the market.

In the backdrop of above, we can say that our economy in comparison with banking sector has become large. Some large size scam has been taking place so Risk Management tools and techniques of our banking sector needs to be tightened further and revisited carefully so that our banking sector can remain unharmed in the times ahead. Risk Management Organization and Governance

Elements of a sound risk management system

The key elements of a sound risk management system should cover the following:

• Risk management structure with board and senior management.
• Organizational policies, procedures and limits that have been developed and implemented to manage business operations effectively.
• Adequate risk identification, measurement, monitoring, control and management information systems that are in place to support all business operations.
• Establish internal controls and the performance of comprehensive audits to detect any deficiencies in the internal control environment in a timely manner. It should not be understood that risk management is only limited to the individuals, who are responsible for overall risk management function. Business lines are equally responsible for the risks they are taking. Because the line personnel can understand the risks of their activities, any lack of accountability on their part may hinder sound and effective risk management.

Board and senior management oversight

The quality of board and senior management oversight is evaluated in relation to the following elements:

• Whether the board and senior management have identified and have a clear understanding of the types of risk inherent in business lines and whether they have taken appropriate steps to ensure continued awareness of any changes in the levels of risk.
• Whether the board and senior management have been actively involved in the development and approval of policies to limit the risks, consistent with the bank’s risk appetite.
• Whether the board and senior management are well-informed about the methods available to measure risks for various activities.
• Whether the board and senior management carefully evaluate all the risks associated with new activities and ensure that the proper infrastructure and internal controls are in place.
• Whether the board and senior management have provided adequate staffing for the activity and designated staff with appropriate credentials to supervise the activity.

Policies, procedures and limit structure

The following key factors are to be considered in evaluating the adequacy of policies, procedures and limits:

• Whether policies, procedures and limits are properly documented, drawn up after careful consideration of the risks associated with the activity and reviewed and approved by management at the appropriate level.
• Whether policies assign full accountability and clear lines of authority for each activity and product area.
• Whether compliance monitoring procedures have been developed. These procedures should include internal compliance checks for obedience to all policies, procedures and limits by an independent function within a bank such as an internal control unit.

Risk measurement, monitoring and management reporting systems

• Effective risk monitoring requires banks to identify and measure all quantifiable and material risk factors. Consequently, risk monitoring activities must be supported by information systems that provide the management with timely and accurate reports on the financial condition, operating performance and risk exposure of the bank.
• Management information systems should provide regular and sufficiently detailed reports for line managers engaged in the day-to-day management of the bank’s business operations.
• All banks are expected to have risk monitoring and management information systems that provide senior management with a clear understanding of the bank’s positions and risk exposures.
• The following factors should be considered in assessing the effectiveness of the risk measurement, monitoring and management reporting systems:

1. The adequacy, on a historical basis, of the risk monitoring practices and reports addressing all material risks of the organization.
2. The adequacy and appropriateness of the key assumptions, data sources and procedures used to measure and monitor risk, including the adequacy of analysis, documentation and reliability testing of the system on a continuing basis.
3. Any material changes in the bank’s lines of business or products that might require changes in the measuring and monitoring systems.
4. Any changes in the information technology or management information system environment that have significantly changed the production process for reports or the assumptions on which reports are based.
5. How consistently management information reports and other forms of communication monitor all meaningful exposures, check compliance with established limits, goals or objectives and compare actual with expected performance.
6. The adequacy, accuracy and timeliness of reports to the Board and senior management and whether such reports contain sufficient information for them to identify any adverse trends and to evaluate the level of risks fully.

Internal controls and comprehensive audits

• A critical element of a bank’s ability to operate in a safe and sound manner and to maintain an acceptable risk management system is the adequacy of its internal control environment. Establishing and maintaining an effective system of controls, including the enforcement of official lines of authority and the appropriate segregation of duties, is one of management’s most important responsibilities. Serious lapses or deficiencies in internal controls such as inadequate segregation of duties may warrant supervisory action.
• When properly structured, a system of internal controls promotes effective operations, provides for reliable financial reporting, safeguards assets and helps to ensure compliance with relevant laws, regulations and internal policies. An independent internal auditor should test internal controls and the results of these audits, including management’s response to the findings, should be properly documented.

The following factors should be considered in evaluating the adequacy of the internal control environment:

1. The appropriateness of the system of internal controls in relation to the type and level of risks posed by the nature and scope of the bank’s business operations and products.
2. Whether the bank’s organization structure establishes adequately clear lines of authority and responsibility for monitoring compliance with policies, procedures and limits.
3. Whether reporting lines provide for sufficient independence of the control functions from the business areas, as well as adequate segregation of duties throughout the organization (such as those relating to trading, custodial and back-office operations or loan origination, marketing and processing).
4. Whether the official organizational structure reflects actual operating practices.
5. The reliability, accuracy and timeliness of all financial, operational and regulatory reports.
6. The adequacy of procedures for ensuring compliance with applicable laws, regulations and internal policies and procedures.
7. The effectiveness, independence and objectivity of internal audit or other control and review procedures in providing adequate coverage of the bank’s operations.
8. Whether internal controls and information systems are adequately tested and reviewed.
9. Whether the coverage, procedures, findings and management responses to audits are adequately documented.
10. Whether identified material weaknesses are given appropriate and timely high-level attention and management’s actions to correct material deficiencies are objectively verified and reviewed.

The concept of risk appetite

The risk management framework is expected to be developed and applied within an overarching statement of risk appetite. Risk appetite is set by the Board and reflects shareholder aspirations within the constraints of regulatory requirements, creditor and legal obligations.

Definition of risk appetite

Risk appetite is the level and type of risk a bank is able and willing to assume in its exposures and business activities, given its business objectives and obligations to stakeholders (depositors, creditors, shareholders, borrowers, regulators). Risk appetite is generally expressed through both quantitative and qualitative means and should consider extreme conditions, events, and outcomes. It should be stated in terms of the potential impact on profitability, capital, and liquidity.

Risk Management in CBL

Risk management is an important and sensitive process, as a minor error can be fatal. This is why several divisions are assigned to manage each risk type separately. Currently the credit risk management unit is named as Credit Risk Management (CRM) Division. This division basically identifies and mitigates the credit risk inherent in every loan proposal. The market risk /investment risk is taken care by the ALCO and Head of Treasury and Market Risk Division and Operational Risk is taken care by Operation Support Division.

The Risk Audit function done by Internal Control and Compliance Division is to provide an independent assessment of the adequacy and reliability of the risk management processes, and compliance with risk policies and regulatory guidelines. The key functions of Risk Audit Team are as under:

• Provide an independent assessment of the adequacy of the risk management processes and compliance with risk policies and regulatory guidelines.
• Ensure maintenance of system of internal controls and compliance with laws and regulations, internal procedures and guidelines.
• Support and maintain the independence of the internal and external audit functions. Presently CBL does not maintain any risk register in a comprehensive way. Though the Internal

Control & Compliance Division is maintaining risk profile but it is not sufficient. The RMD will be maintaining a Risk Register and Risk Log with the assistance of ICCD in the near future. Proposed Framework

Under the proposed framework, a holistic approach will be followed in managing risk. Under the framework 2 (two) different Units will be tasked. The Risk Management Department (RMD), a division headed by Chief Risk Officer (CRO) will act as the centre of all risk management function of CBL and will continuously support the Risk Management Unit (RMU) to be in place to establish supervisory review process under the guidelines of Basel II and to be compliant of Bangladesh Bank‟s instruction vide letter # DOS (EW)1164/14(the City)/2009-586 dated September 24, 2009, under the supervision of the Chief Risk Officer (CRO).

RMD is responsible for managing and monitoring risks. The RMU is responsible for implementing all risk management decision taken in the meeting of the Unit held once in a month. The overall control for Risks lays with the Chief Risk Officer (CRO), who performs his/her jobs through the Risk Management Unit (RMU).

Findings & Recommendations

Finding

• Presently CBL does not maintain any risk register in a comprehensive way. Though the Internal Control & Compliance Division is maintaining risk profile but it is not sufficient.
• The Bank is too much centralized. For each and every move, branch office has to go for permission from the Head Office. The Head Office tightly controls each and every branch office. This helps in managing the risk efficiently but puts colossal pressure on the head office. It also blurs the customer needs as a risk manager in head office has limited idea of customer preferences.
• Apart from these, the risk function in CBL is showing good signs of constant improvement. Scope of improvement
• The risk management of The City Bank Ltd. is quite efficient compared to the others but there is significant scope of improvement.
• The Bank has to expose the Risk Managers to customer preferences by letting them interview the customers before lending out loans.
• Steps to decentralize the risk functions up to some level.

Conclusion

CBL has shown great enthusiasm in maintaining its reputation in the banking sector since the inception. It has constantly under gone changes complying with the changing environment. After the introduction of the Risk Management Practice it has under gone massive restructuring and coped up with the prevailing environment. All of these together have made it the top notch organization it is today.

Working for an organization whose value includes „Result Driven‟ has been tough indeed. Charged by the responsibility of „Research Support‟ I had to browse the universe of existing literature of the prescribed topics which required fundamental knowledge and an insight on the problem statement. Besides, review of researches already completed required, aptitude in research methodology. The course named „Research Methods in Business and Management‟ helped me a lot in overcoming these issues. The past few months have been an expended experience for me, and it has been an honor to have completed my internship in such a valiant organization.