Risk Management of Islami Bank Bangladesh Limited (original) (raw)

Islami Bank Bangladesh Limited is the first Islami “Shariah” based commercial bank in Bangladesh. It was established in March 13, 1983 and started operation on March 30, 1983 under Banking Company Ordinance 1962. Currently it is one of the largest Private Commercial Bank and has 317 branches. In this report the Risk Management of Islami Bank Bangladesh Limited has been discussed. It gives an overview of Risk Management procedures and structures of Islami Bank Bangladesh Limited. Two regression analysis has been done. The first regression named Risk Disclosures, tests whether there is any relationship of Risk Disclosures with the independent variables. The independent variables are debt to equity ratio, return on equity, net investment income, value at risk, non-performing loan and capital adequacy ratio. The purpose is to see whether management discloses more or less depending on the condition of these variables. A second regression analysis tested the hypothesis that “Good Governance and Good Regulations give higher return”. Here Return on Equity (ROE) has been considered as proxy for Profitability, Number of Directors (NOD) as proxy for Governance and Net Profit Margin (NPM) as proxy for Regulations. NPM has been taken as proxy for Regulation because a good internal regulation ensures better return. Next in the compliance section a score has been given against the Bangladesh Bank risk management guidelines and given comments to calculate a total score. It checks how well the bank is following Bangladesh Bank Risk Management Guidelines. After that another score is given against the BSEC (Bangladesh Securities and Exchange Commission) disclosures and evaluated. Then Quantitative disclosures under Basel guidelines are checked and irregularities are presented. Also key trend in BASEL disclosures has been presented via graph to visualize the growth/decline and commented. BASEL based risk disclosures are explained. Finally past 9 year key financial ratios has been presented to assess the overall condition, which also help to describe the condition of the bank. At last recommendations are given to solve the problems and to do better where the bank is lacking. So the report is both qualitative and quantitative.