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TT-Clean: 77.1 | TK BC-Selling: 78.1
TK OD-Sight: 76.88 TK | TC-Selling: 78.1 TK

TT-Clean: 77.1 | TK BC-Selling: 78.1
TK OD-Sight: 76.88 TK | TC-Selling: 78.1 TK

£

TT-Clean: 77.1 | TK BC-Selling: 78.1
TK OD-Sight: 76.88 TK | TC-Selling: 78.1 TK

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Rate last updated: 02/01/2014 11:15:04 AM

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Risk Management Division of Dhaka Bank Limited had been established in line with the directives of Bangladesh Bank, with effect from February 26, 2013 for strengthening risk management activities of the bank. The responsibility of the division is to ensure effectiveness of the Core Risks Management of the Bank and also to ensure the capital management of the Bank under Basel Accords in line with the directives of Bangladesh Bank from time to time.

RMD is responsible to manage and measure risk on the basis of the bank’s approved risk parameters, even independently of minimum regulatory requirements and category. It is responsible for designing risk management strategy, establishing risk management policies & procedure, communicating views of Board & Senior Management regarding risk issues throughout the bank, determining Risk Appetite of the Bank and have it approved by the Risk Committee of the Board of Directors, measuring & monitoring risk, identifying & quantifying bank’s exposure to material loss, independently monitor limits, developing & implementing loss prevention/retention programs, securing & maintaining adequate loss coverage, periodic stress testing, preparation of monthly risk management paper, half yearly Comprehensive Risk Management Report& holding meeting of All Risk Committee etc.

THE CHIEF RISK OFFICER

Presently the Chief Risk Officer (CRO) of the Bank is Mr. Khan Shahadat Hossain, Deputy Managing Director – Risk Management. The Division is working as secretary of All Risk Committee (which comprised of heads of all core risk owners and previously known as RMD Committee) of the Bank. Members of All Risk Committee are as follows:

All Risk Committee
Sl. Name of the Employee Designation Position in the Committee
 1 Mr. Khan Shahadat Hossain Deputy Managing Director – Risk Management Chairman
 2 Mr. Md. Sirajul Hoque SEVP & Head of SME & Islami Banking Member
 3 Mr. A.M.M. Moyen Uddin SEVP & Head of Information Technology Member
 4 Mr. Md. Shafquat Hossain SEVP & Head of Retail Banking Member
 5 Mr. Mostaque Ahmed Khan EVP & Head of SAMD & Legal Affairs Member
 6 Mr. Manik Lal Biswas EVP & Head of Risk Management Member Secretary
 7 Mr. Darashiko Khasru EVP & CFO Member
 8 Mr. S.M. Abdulla Hil Kafi EVP & Head of Internal Control & Compliance Member
 9 Mr. Md. Abdul Matin EVP, & Head of Credit Risk Management Member
 10 Mr. Md. Fakhrul Islam SVP & Head of AML and Business Operations Member
 11 Mr. Mir Saidul Islam SVP & Head of CPC – Credit Operations Member
 12 Mr. K. M. Faisal Faruqui FVP & Head of ALM and FX Member
Stress Testing
Stress testing is a risk management technique used to evaluate the potential effects on an institution’s financial condition of a specific event and/or movement of a set of financial variables. This involves several shocking events e.g. increase of NPLs, change of interest rates, change of exchange rates, market price changes, decrease in forced sale value of collaterals etc. Each shocking events contains Minor, Moderate and Major levels of shock.
OBJECTIVE OF STRESS TESTING
The Stress Testing report provides a structured way of assessing the vulnerability of a Bank to extreme but plausible market condition. The Stress Testing report also enable Banks to accurately assess the impact of risks and define the ‘risk appetite’ of the organization and also provide critical information to the top Management as well to Board of Directors for decisions around capital allocation and contingency planning.
Our stress testing framework is designed to
  • Contribute to the setting and monitoring of risk appetite
  • Identify key risks to our strategy, financial position and reputation
  • Examine the nature and dynamics of the risk profile and assess the impact of stresses on our profitability and business plans
  • Ensure effective governance, processes and systems are in place to co-ordinate and integrate stress testing
  • Inform senior management
  • Ensure adherence to regulatory requirements
Reporting by Risk Management Division
In compliance with Bangladesh Bank directives, Risk Management Division conducted the following reporting and takes actions accordingly:

Sl. Deliverables Format/Method Compliance Status Remarks
 1 Nomination of Recognized ECAIs As In BRPD Circular # 12/2012 Complied
 2 Stress Testing Report Bangladesh Bank Guideline Complied Stress Testing Report is submitted on a quarterly basis starting from June 2010.
 3 Risk Management Paper Bangladesh Bank Guideline Complied Monthly reporting to Bangladesh Bank
 4 Comprehensive Risk Management Report Bangladesh Bank Guideline Complied Half yearly reporting to Bangladesh Bank
CREDIT ASSESSMENT INSTITUTES
Dhaka Bank has nominated 8 (eight) recognized External Credit Assessment Institutes operate in Bangladesh namely:

  • Credit Rating Information & Services Ltd. (CRISL)
  • Credit Rating Agency of Bangladesh (CRAB)
  • National Credit Rating Limited
  • Emerging Credit Rating Limited.
  • ARGUS Credit Rating Service Limited (ACRSL)
  • WASO Credit Rating Company (BD) Limited
  • Alpha Credit Rating Ltd and
  • The Bangladesh Rating Agency Limited (BDRAL).

BASEL III

Apart from risk management activities, RMD is also responsible to implement Basel accords in the Bank as per the guidelines of Bangladesh Bank time to time.

BASEL III
Basel III reforms are the response of Basel Committee on Banking Supervision (BCBS) to improve the banking sector’s ability to absorb shocks arising from financial and economic stress, whatever the source, thus reducing the risk of spillover from the financial sector to the real economy. Basel III reforms strengthen the bank-level i.e. micro prudential regulation, with the intention to raise the resilience of individual banking institutions in periods of stress. Besides, the reforms have a macro prudential focus also, addressing system wide risks, which can build up across the banking sector, as well as the procyclical amplification of these risks over time. These new global regulatory and supervisory standards mainly addressed the following areas:

  • raise the quality and level of capital to ensure banks are better able to absorb losses on both a going concern and a gone concern basis;
  • increase the risk coverage of the capital framework;
  • introduce leverage ratio to serve as a backstop to the risk-based capital measure;
  • raise the standards for the supervisory review process (Pillar 2); and
  • Public disclosures (Pillar 3) etc.

Consequently, Basel III capital regulations would be fully implemented as on January 1, 2019. The framework of Basel III Capital Accord consists of three pillars:

1st Pillar: Minimum Capital Requirements

Provide approaches to the calculation of Minimum Capital Requirements (MCR). MCR is based on credit risk, market risk and operational risk to:

  • reduce risks of failure by cushioning against losses;
  • provide continuing access to financial markets to meet liquidity need; and
  • provide incentives to prudent risk management

2nd Pillar: Supervisory Review Process
Provides the framework to ensure that each Bank has sound internal processes to enable it to perform a thorough evaluation of its risks and therefore assess the required capital. The Supervisory Review Process (SRP) recognizes the responsibility of Bank management in developing an internal capital assessment process and setting capital targets that are commensurate with the Bank’s risk profile and control environment.

The Basel Committee has identified four key principles of supervisory review:

  • Banks should have a process for assessing their overall capital adequacy in relation to their risk profile and a strategy for maintaining their capital levels;
  • Supervisors should review and evaluate Bank’s internal capital adequacy assessments and strategies, as well as their ability to monitor and ensure their compliance with regulatory capital ratios;
  • Supervisors should expect Banks to operate above the minimum regulatory capital ratios and should have ability to require Banks to hold capital in excess of the minimum; and
  • Supervisors should seek to intervene at an early stage to prevent capital from falling below the minimum levels required to support the risk characteristics of a particular Bank and should require rapid remedial action if capital is not maintained or restored.

3rd Pillar: Market Discipline

The purpose of Pillar-3, market discipline, is to complement the minimum capital requirements (Pillar-1) and the supervisory review process (Pillar-2). The Basel Committee aims to encourage market discipline by developing a core set of disclosure requirements which will allow market participants to assess key pieces of information on the scope of application, capital, risk exposure, risk assessment process, and hence the capital adequacy of the institution.

In principle Banks’ disclosure should be consistent with how senior management and the Board of Directors (BoDs) of the Bank assesses and manage different risks of the Bank.

Capital Charge Method For Risks
As per the requirement of Basel III accords, Banks have to determine minimum capital for three major types of risks faced by the banking industry as described below :

  • Credit Risk – risk of losses resulted from debtor’s non-payment of a loan, double default etc.
  • Operational Risk – risk of losses resulted from inadequate and failed internal processes, systems, people and external events like information technology, fraud & forgery, money laundering, legal contracts etc.
  • Market Risk – risk of losses in on- and off-balance sheet items arising from movements in the market prices of interest rate, foreign exchange rate, equity securities, commodities etc.
Rationale For Basel III
To cope with the international best practices and to make the Bank’s capital more risk-sensitive as well as more shock-resilient, Bangladesh Bank has made it mandatory to comply with Risk Based Capital Adequacy (RBCA) under Basel III. Accordingly, capital requirement for Banks those hold risky assets in their investment portfolio shall be higher compared to Banks that hold safer portfolio.
BASEL III: DHAKA BANK PERSPECTIVE
Dhaka Bank believes that stepping into the Basel III regime, the new capital accord, is sincere and most appropriate decision of Bangladesh Bank. This changeover is justified in order to make Bank’s capital more risk-sensitive and shock-absorbent in changed scenario of banking industry of our country which is characterized by increased complexity, increased use of information technology and diversity in the asset portfolio of the Banks.

Accordingly, Dhaka Bank has taken the issue of Risk Based Capital Adequacy for Banks under Basel III accord, as one of its topmost priorities.

Dhaka Bank has established an independent Basel Unit (BU) at Head Office on January 10, 2016 for effective implementation of the new capital accord and ensuring Board & Senior Management oversight. The BU, is exclusively responsible for planning & reviewing the implementation of Basel III accord as per Bangladesh Bank’s Road Map, for liaison about issues of Basel III with top management of DBL, for capacity building of concerned Bank personnel and for planning & developing process for assessing overall capital adequacy.

Dhaka bank has formed an exclusive body, named SRP Team to ensure that Dhaka Bank has a process for assessing overall capital adequacy in relation to their risk profile and a strategy for maintaining their capital at an adequate level. Accordingly DBL is ensuring compliance under Pillar-2: Supervisory Review Process of Basel III Accord.

REPORTING UNDER BASEL III BY DHAKA BANK LIMITED
Sl. Deliverables Compliance Status Remarks
1 Quantitative Impact Analysis (QIS) Complied
2 Nomination Of Recognized ECAIs Complied
3 Pillar-1: MCR Reporting Complied MCR Report is submitted on a quarterly basis
4 Pillar-2: Statement Of Capital Adequacy Under SRP (ICAAP) Complied Submitted position of December 31, 2015
6 Pillar-3: Market Discipline A Disclosure Framework (Qualitative & Quantitative) Complied Market Disclosure is given on a yearly basis started from the year- 2009.
BASEL UNIT (BU)
Dhaka Bank has a 14-member Basel Unit, having cross-functional representations, to ensure effective implementation of Risk Based Adequacy requirements under the new capital accord named Basel III. However, to supervise the implementation more closely and sincerely a Core Team for Basel III was formed on January 10, 2016 with members from the existing Basel Unit. It is presently headed by Mr. Syed Mahbubur Rahman, Managing Director & CEO of the Bank.

The Basel Unit consists of the following members representing Senior Management from different cross-functional Divisions

Sl. Name of the Employee Designation Position in the Committee
 1 Mr. Syed Mahbubur Rahman Managing Director & CEO Chairman
 2 Mr. Emranul Huq Additional Managing Director Member
 3 Mr. Khan Shahadat Hossain DMD – RM & CRO Member
 4 Mr. Md. Shakir Amin Chowdhury DMD-Operations Member
 5 Mr. Mohammad Abu Jafar DMD- International Business Member
 6 Mr. A M M Moyen Uddin SEVP & Head, IT Division Member
 7 Mr. Darashiko Khasru EVP & CFO Member
 8 Mr. S.M. Abdullah Hil Kafi EVP & Head, ICC Division Member
 9 Mr. Md. Abdul Matin EVP & Head, CRM Division Member
 10 Mr. Manik Lal Biswas EVP & Head, Risk Management Division Member
 11 Mr. Fakhrul Islam SVP & Head, Business Operations Division Member
 12 Mr. K.M. Faisal Faruqui VP & Head, Treasury Division Member
Working Team:
 13 Mr. Ahmed Arefin, ACA FVP & In Charge, Basel Unit Member Secretary
 14 Mr. Mahamudur Rahman AVP, Basel Unit Member

The BU members meet on regular basis, to monitor the implementation status of Risk Based Capital Adequacy for the Bank and, also to discuss issues which may directly influence capital requirement.

SUPERVISORY REVIEW PROCESS (SRP) TEAM
The SRP Team, responsible for assessing overall capital adequacy in relation to their risk profile and capital planning, consisting of following members representing Senior Management and different cross-functional Divisions of the Bank:

Sl. Name Designation Position in the Team
 1 Mr. Syed Mahbubur Rahman Managing Director & CEO Chairman
 2 Mr. Emranul Huq Additional Managing Director Member
 3 Mr. Khan Shahadat Hossain DMD – RM & CRO Member
 4 Mr. Md. Shakir Amin Chowdhury DMD-Operations Member
 5 Mr. Mohammad Abu Jafar DMD- International Business Member
 6 Mr. A M M Moyen Uddin SEVP & Head, IT Division Member
 7 Mr. Darashiko Khasru EVP & CFO Member
 8 Mr. S.M. Abdullah Hil Kafi EVP & Head, ICC Division Member
 9 Mr. Md. Abdul Matin EVP & Head, CRM Division Member
 10 Mr. Manik Lal Biswas EVP & Head, Risk Management Division Member
 11 Mr. Fakhrul Islam SVP & Head, Business Operations Division Member
 12 Mr. Mir Saidul Islam SVP & Head, CPC- Credit Operations Division Member
 11 Mr. Ahmed Arefin ACA FVP & In-charge, Basel Unit Member

The SRP Team will review and assess overall capital adequacy in line with the Bank’s risk profile and strategy for maintaining Bank’s capital at an adequate level, i.e., enough capital to compensate all the risks in the Bank’s business, and to develop & practice better risk management techniques in monitoring and managing risks. The SRP Team of the Bank is responsible to ensure that the Bank has adequate capital to support its risks beyond the minimum regulatory requirements.
The Team with the help of Basel Unit is presently working closely to develop and finalize the process document called Internal Capital Adequacy Assessment Process (ICAAP) for assessing Bank’s overall risk profile.
The SRP Team is entrusted with responsibility to move gradually towards more advanced approaches of calculating risk-weighted assets against credit risk, capital charge against market risk and operational risk.