...Introduction Risk is inherent in all aspects of a commercial operation; however for Banks and financial institutions, credit risk is an essential factor that needs to be managed. Credit risk is the possibility that a borrower or counter party will fail to meet its obligations in accordance with agreed terms. Credit risk, therefore, arises from the bank’s dealings with or lending to corporates, individuals, and other banks or financial institutions. Credit Risk Grading is an important tool for credit risk management as it helps a Bank to understand various dimensions of risk involved in different credit transactions. The aggregation of such grading across the borrower, activities and the lines of business can provide better assessment of the quality of credit portfolio of a bank or a branch. The credit risk grading system is vital to take decisions both at the pre-sanction stage as well as post-sanction stage. At the pre-sanction stage, credit grading helps the sanctioning authority to decide whether to or not to lend, what should be the pricing for a particular exposure, what should be the exposure, what should be the appropriate credit facility, what the various facilities are and what are the various risk mitigation tools to put a cap on the risk level. At the post-sanction stage, the bank can decide about the depth of the review, periodicity of the grading, and other precautions to be taken. Having considered the significance and necessity of credit risk grading for a Bank...
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...Credit risk Credit risk is a fast changing discipline at the leading edge of risk management practice. The recent credit crisis brought into focus the need for effective risk management control and highlighted many of the deficiencies of the banks’ approach to measuring credit risk. This has resulted in many financial institutions reviewing their existing approach to the management of credit risk from a process, organisational and systems perspective. At the same time, many institutions are also continuing to develop more sophisticated methods of risk management, such as measuring and hedging Credit Valuation Adjustments (CVA) and modelling economic capital and incremental risk Definitions of Credit risk: ❖ Credit risk is the risk of loss due to a debtor's non-payment of a loan or other line of credit (either the principal or interest (coupon) or both). ❖ Is the risk that another party to an investment transaction will not fulfill its obligations. Credit risk can be associated with the issuer of ❖ The likelihood that an individual will pay his or her credit obligations as agreed. Borrowers who are more likely to pay as agreed pose less risk to creditors and lenders. ❖ Risk of loss that may arise on outstanding contracts should a counter party default on its obligations. ❖ The risk that a counter party to a transaction will fail to perform according to the terms and conditions of the contract, thus causing the holder of the claim to suffer a loss. ...
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...an agreement. It occurs when bad credit risks (firms with poor investment channels and high inherent risks) become more probable to acquire loans than good credit risks (firms with better investment opportunities and less inherent risks). Moral Hazard is the associated problem of information asymmetry that arises after the parties to a contract reach an agreement. It arises when the borrower has an incentive to breach the loan covenants by investing in ‘immoral projects’ which are unacceptable to the borrower and also have a high possibility of default. Both these risks occur because of the lenders’ imperfect knowledge about the borrowers and their activities. For Financial institutions, information asymmetry inherent to credit disbursement is a key risk that needs to be managed. II. Bangladesh Bank Guidelines for Credit Risk Management As the central bank and apex regulatory body for the country's monetary and financial system, Bangladesh Bank provides a number of recommended policy and procedural guidelines to the financial sector that are directional in nature and aims to improve the risk management culture. Policy guidelines of Bangladesh Bank include Lending Guidelines, Credit Assessment & Risk Grading, Approval Authority, Segregation of Duties and Internal Audit while Procedural Guidelines include Credit Approval, Administration, Monitoring and Recovery. III. Credit Risk Management System of Trust Bank Limited The Risk Management Committee of Trust Bank...
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...Executive Summary Eastern Bank’s tagline is “Simple Math”. But it is not so simple to serve the borrowers with the right package. A bank’s major liability is to deliver significant returns to their depositors. Unlike returns to shareholders, this return is promised. Unless delivered, depositors may take back the return with a vengeance; bankrupting the bank in the process. The banks developed various form of debtor selection processes to protect themselves against depositors grudge, i.e. delinquency of borrowers. CRG (Credit Risk Grading) and CRR (Credit Risk Rating) together makes one of those processes. This report is titled “Predicting Delinquency of EBL’s Corporate Customers.” EBL is one of the leading private commercial banks of Bangladesh. After starting its operation in 1992, the bank established itself as one of the most technologically advanced banks of the country. EBL has been offering diverse portfolio of products to its customer. CRG process is a borrower selection process advised by Bangladesh Bank. Private commercial banks in Bangladesh use CRG to predict the possibility of delinquency in the form of CRR. EBL uses the same process. This report first develops a model to test the CRR against financial data of a firm. Data obtained from 35 borrowers of EBL were used to run a linear regression taking CRR ratings of respective firms as dependent variable. Running the regression, the model shows that CRR of a firm does not reflect the firm’s financial data properly...
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...Report on Bank Asia Limited May 21, 2013 | Author: Jannatul Ferdous | Posted in Credit Management Table of Contents * 1 Introduction * 1.1 Structure of the Corporate Office * 1.2 Directors’ and Key Persons’ Profile * 1.3 Mission Statement of Bank Asia * 1.4 Corporate Objectives * 1.5 SWOT Analysis of Bank Asia * 1.5.1 Strength * 1.5.2 Weaknesses * 1.5.3 Opportunities * 1.5.4 Threats * 1.6 Values Considered as Guiding Factors * 1.7 Equity Formation * 1.8 Performance of the Bank * 1.8.1 Profit and Operating Results * 1.8.2 Deposit * 1.8.3 Advance * 1.8.4 Foreign Exchange Business * 1.8.5 Investment * 1.8.6 Dividend * 1.9 Special Features of the Bank * 1.10 Products and Services * 1.11 Correspondence Relationship * 1.12 Customer Service * 1.13 Department: Cash * 1.14 Department: Accounts * 1.15 Department: Credit * 1.16 Department: Foreign Trade * 2 Introduction * 2.1 Types of Credit Facility by Bank Asia * 2.1.1 Funded Facilities * 2.1.1.1 Over Draft * 2.1.1.2 Secured Over Draft * 2.1.1.3 Term Loan * 2.1.2 Personal Credit * 2.1.3 Non-Funded Facilities * 2.1.3.1 Guarantee * 2.1.3.2 Features of Bank Guarantee * 2.1.3.3 Syndicate Loan ...
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...Internship Report Impact of Credit Rating on Corporate and Banking Sectors of Bangladesh A Study based on Ratings of Credit Rating Agency of Bangladesh Limited (CRAB) Exam Roll: 091127 Internship Report on Impact of Credit Rating on Corporate and Banking Sector of Bangladesh A Study based on Ratings of Credit Rating Agency of Bangladesh Ltd. (CRAB) Prepared For: Chairman Internship Placement Committee Prepared by: Exam Roll Number: 019927 Class ID: 892 4th year, 8th semester Batch Number: 18th, BBA Program Academic Session: 2008-09 Institute of Business Administration (IBA-JU) Jahangirnagar University, Savar, Dhaka 1342 Date: 16.02.2013 Letter of Transmittal February 16, 2013 Chairman Internship Placement Committee Institute of Business Administration Jahangirnagar University Savar, Dhaka 1342. Subject: Submission of Internship Report Dear Sir, It is an event of great pleasure for me to prepare and present the internship report on ‘Impact of Credit Rating on Corporate and Banking Sectors of Bangladesh: A Study based on Rating of Credit Rating Agency of Bangladesh Limited (CRAB)’ which is a requirement for the completion of BBA program. In this report I have tried to identify different aspects of the credit rating service and its impact on the corporate and banking sectors of the country. I have tried my best to organize all relevant information and do according to the instructions of preparing...
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...Chapter – One Introduction 1. Preclude Credit is an arrangement whereby bank acting at the request and on the instructions of a customer or on its own behalf to make a payment to or to the order of a third party or is to accept and pay bills of exchange drawn by the beneficiary. In an economy banks play the role of an intermediary that channels resources from the surplus group to the deficit group. So obviously one of the core functions of Commercial banks is to sanction Credit facility to it’s customers as per requirement. UTTARA BANK LTD. Bank’s Mission is to actively participate in the growth and expansion of our national economy by providing Credit to various customers in most efficient way of delivery and at a competitive price. Risk is inherent in all aspects of a commercial operation; however for Banks and financial institutions, credit risk is an essential factor that needs to be managed. Credit risk is the possibility that a borrower or counter party may fail to meet its obligations in accordance with agreed terms. Credit risk therefore, arises from the bank’s dealings with or lending to corporate, individuals and other banks or financial institutions. In general, a banking system aggregates a high number of low value deposits to fund enterprises with a smaller number of high value loans. This intermediation through a well functioning bank helps to achieve some economic benefits for the depositors, the borrowers and...
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...Internship Report On Credit Risk Management: A Study On Sonali Bank Ltd. Supervised By: Shahidul Islam Lecturer Department of Marketing Comilla University Prepared By: Mahmudul Hasan ID – 0807031 Session- 2008-2009 3rd Batch Date: 20th January,2014 Department of Marketing Comilla University Table of Contents Contents Page no. Letter of Transmittal Letter of Authorization Acknowledge Executive Summery Chapter- 01 Introduction Background of the study Problem Statement Objective of the Study Chapter- 02 Literature Review Overview of Sonali Bank Ltd Overview of Credit Risk Management Literature Review: A Theoretical Framework Chapter- 03 Methodology Sources of Data Chapter- 04 Data Analysis & Findings Diagrammatic Analysis SWOT Analysis Findings Conclusions & Recommendations Internship Experiences References Letter of Transmittal 20th January, 2014 Shahidul Islam Lecturer Department of Marketing University of Comilla Sub: Submission of Internship Report entitled “Credit Risk Management : A Study On Sonali Bank Limited. Dear Sir, I am pleased to submit this internship report as you entitled me. I tried my best to present this internship report on Credit Risk Management: A Case Study On Sonali Bank Limited, Agrabad Corporate Branch, Chittagong, according to your...
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...SME CHAPTER ONE INTRODUCTION 1.1 Background of the study: Banking system occupies an important place in a nation’s economy. A banking institution is indispensable in a modern society. Bank is an old institution that is contributing toward the development of any economy and is treated as an important service industry in the modern world. Economic history shows that development has started everywhere with the banking system and its contribution towards financial development of a country is the highest in the initial stage. Modern Banks play an important part in promoting economic development of a country Bank provides necessary funds for executing various programs in the process of economic development. They collect savings from large masses of people scattered throughout the country, which in the absence of banks would have remained ideal and unproductive. These scattered amounts are collected. Pooled together and made available to commerce and industry for meeting the financial requirements. Bank plays a vital role in the economy by providing means of payment and in mobilizing resources. Bank is the most important financial institution in the economy. The economic development of a country depends on the development of banking sector. Today’s modern banks ate not only providing traditional banking but also expanding the many financial services. In today’ world the lice of the people...
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...INTERNSHIP REPORT ON CREDIT RISK MANAGEMENT OF DHAKA BANK LIMTED [pic] EXCELLENCE IN BANKING DEPARTMENT OF FINANCE & BANKING UNIVERSITY OF CHITTAGONG CHITTAGONG. CREDIT RISK MANAGEMENT OF Preface The banking sector of Bangladesh is dominated by commercial banks with huge debt burdens. Inefficiency in loan sanctioning, expansion of preferential loans, and poor classification and administration of loans has led to the slow recovery of credit extended by the banks. To restore efficiency and accountability in this sector, an effective credit risk management system is necessary. To manage credit risk efficiently Bangladesh Bank has provided a guideline for CRM. Besides, Basel Committee on Banking Supervision has set a guideline on Sound credit risk assessment and valuation for loan in order to encourage banking supervisors globally to promote sound practices for managing credit risk. This paper presents a comparative picture of credit risk management of Dhaka Bank Limited with Bangladesh Bank’s guidelines and Basel Committee for Banking Supervision’s (BCBS) guideline regarding Credit Risk Management. This report also provides an overview of the Credit Risk Management of DBL. In this report DBL’s credit risk management system is analyzed into three sections. First of all the policy guidelines have been analyzed and compared with Bangladesh bank’s guideline. After that the organizational structure & responsibilities have been analyzed...
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...Evaluation of Credit Where Credit & Commerce Integrates Background of the Study 1.1 Origin of the Report: Internship Program brings a student closer to the real life situation and thereby helps to launch a career with some prior experience. It is also a part of our education. In our university we learn only theoretical knowledge but to collect practical knowledge we have to do intern. One of the main objectives of the BBA program is to create skilled professional for various sectors. This program is designed to meet the needs of each student who want to develop their career as executives in the field of different business areas as well as teaching and research positions in different institutions. BGC Trust University Bangladesh offered an opportunity to do intern. For the competition of this internship program, the author of the study was placed in a bank namely, “National Credit & Commerce Bank Limited”. My paper topic is monitoring and evaluation of credit of NCC Bank. My internship was at NCC Bank Ltd., Anderkilla Branch, Chittagong. During my internship, I had to prepare a report under the supervision of Mrs . 1.2 Objective of the Report: Project Objective: Presenting and Emphasizing on credit operation, credit risk management and credit performance including the credit payment system. Secondary objective: Objectives assist the researcher to advance objectively. The followings objectives may be with this identified study as presented below: Knowing the credit policy and...
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...Implementation Quarter | 12/20/2011 | All | New curriculum | | June 2012 | | | | | | | | | | | | | | | | | | | | | | | | | | ------------------------------------------------- ------------------------------------------------- Credit hours: 4.5 Contact/Instructional hours: 60 (30 Theory, 30 Lab) Prerequisite: IS3110 Risk Management in Information Technology Security or equivalent Corequisite: None Table of Contents Course Overview 5 Course Summary 5 Critical Considerations 5 Instructional Resources 6 Required Resources 6 Additional Resources 6 Course Management 8 Technical Requirements 8 Test Administration and Processing 8 Replacement of Learning Assignments 9 Communication and Student Support 9 Academic Integrity 10 Grading 11 Course Delivery 13 Instructional Approach 13 Methodology 13 Facilitation Strategies 14 Unit Plans 15 Unit 1: Information Security Policy Management 15 Unit 2: Risk Mitigation and Business Support Processes 25 Unit 3: Policies, Standards, Procedures, and Guidelines 33 Unit 4: Information Systems Security Policy Framework 42 Unit 5: User Policies 50 Unit 6: IT Infrastructure Security Policies 58 Unit 7: Risk Management 66 Unit 8: Incident Response Team Policies 74 Unit 9: Implementing and Maintaining an IT Security Policy Framework 83 Unit 10: Automated Policy Compliance Systems 90 Unit 11: Course Review and Final Examination 97 Course Support Tools 101 ...
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................................................ 25 CONSTITUTION OF THE BOARD OF DIRECTORS AND FIT AND PROPER TEST FOR APPOINTMENT OF BANK DIRECTORS AND DEPOSITOR DIRECTOR .............................. 27 CONSTITUTION OF THE AUDIT COMMITTEE OF BOARD OF DIRECTORS..................... 32 POLICY ON SINGLE BORROWER EXPOSURE …………………………………………….. 34 POLICY FOR RESCHEDULING OF LOANS .............................................................................. 38 POLICY FOR LOAN WRITE OFF ................................................................................................ 41 LARGE LOAN RESTRUCTURING SCHEME (LLRS) ............................................................... 42 REQUIREMENT FOR OBTAINING INFORMATION ON LARGE LOAN FROM CREDIT INFORMATION BUREAU ............................................................................................................ 44 PAYMENT OF DIVIDEND BY BANK COMPANIES................................................................. 44 LOAN AGAINST SHARES, DEBENTURES ETC ....................................................................... 46 INTEREST RATES ON DEPOSIT AND LENDING .................................................................... 47 BANK...
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...“Credit Management and performance evaluation of National Bank Limited” Chapter – 01 Introduction OF THE REPORT 1.1 Introduction National bank limited (NBL) is a full service scheduled commercial bank. It has both local and International Institutional Shareholder. The bank is primarily driven with a view of creating opportunities and pursuing market niches not traditionally meet by conventional banks. National Bank has been motivated to provide “best-in-the-class” services to its diverse assortment of customers spread across the country under an on-line banking dais. Today, National Bank is one of the fastest growing banks in the country. In order to support the planned growth of its distribution, network and its various business segments, National Bank is currently looking for impressive goal oriented, enthusiastic, individuals for various business operations. The bank wants to build a profitable and socially responsible financial institution. It carefully listen to the market and business potentials, It is also assisting stakeholders to build a progressive, healthy, democratic and poverty free Bangladesh. It helps make communities and economy of the country stronger and to help people achieve their financial goals. The bank maintains a high level of standards in everything for our customers, our shareholders, our acquaintances and our communities upon, which the future affluence of our company rests. Risk is inherent in all aspects of a commercial operation...
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...my study on “Credit Approval & Monitoring process of BRAC Bank Limited” with respect to Bangladesh Bank guidelines. My faculty supervisor Mr Khandaker Zahidul Alam, Assistant Professor of BRAC Business School, BRAC University, also approved the topic and authorized me to prepare this report as part of the fulfillment of internship requirement and gave me proper guidance and assistance over time. 1.2 Background of the Report Four years back, Bangladesh Bank undertook a project to review the global best practices in the banking sector and examines in the possibility of introducing these in the banking industry of Bangladesh. Four ‘Focus Groups’ were formed with participation from Nationalized Commercial Banks, Private Commercial Banks & Foreign Banks with representatives from the Bangladesh Bank as team coordinators to look into the practices of the best performing banks both at home and abroad. These focus groups identified and selected five core risk areas and produced a document that would be a basic risk management model for each of the five 'core' risk areas of banking. The five core risk areas are as follows- a) Credit Risks; b) Asset & Liability / Balance Sheet Risks; c) Foreign Exchange Risks; d) Internal Control & Compliance Risks; and e) Money Laundering Risks. Bangladesh Bank in one of it’s circular (BRPD Circular no.17) advised the commercial banks of Bangladesh to put in place an effective credit approval and...
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