Dutch Bangla Bank Limited is one of the leading commercial bank in Bangladesh right now. It was established by local shareholder M. Sahabuddin Ahmed and the Dutch Company FMO. It head office located on Sena Kalyan Bhaban, 4th Floor 195 Motijheel Commercial Area Dhaka-1000,Bangladesh. It has 83 branch offices all around the country. Dutch Bangla Bank Limited has a wide ATM networks all over the country. It has set up over 1062 ATM booths in Bangladesh.
Dutch Bangla Bank Limited has been financing the high growth manufacturing industries in Bangladesh, at the same time it is working on corporate social responsibility (CSR). Dutch Bangla Bank Limited is the pioneer of CSR and for this it is termed the contribution as "Social responsibility". It is one of the largest donor and the largest donor bank in Bangladesh. It has been given numerous international awards because of its contribution as socially responsible bank. Dutch Bangla Bank Limited is the first bank in Bangladesh which is fully automated. It established E-Banking (Electronic Banking)in 2002 to facilitate rapid automation and bring modern services into this field. Full automation was made in 2003. Firstly, it introduced plastic money to Bangladeshi people. It is operating the largest ATM fleet which reduces customer costs and fees by 80%. It is practicing low profitability route for this sector which has surprised many critics. It has brought much automation in banking as a CSR activity. For this, it is providing ultra modern banking facilities to its customers for which most local banks are joining in the infrastructure of banking system of Dutch Bangla Bank Limited.
Profit alone is not the only objective; it gives the customer the super first services. They believe "Man doesn't live by bread and butter alone". It focuses on the better Bangladesh which included arts and letters, sports and athletics, science and education, health and hygiene, clean and pollution free environment and a society based on morality and ethics.
Dutch Bangla Bank Limited fonder and foundation chairman Mr. M Salauddin Ahmed has been given Khandakar Ahsanullalh Gold Medal in 2006. Dutch Bangla Bank Limited launched the first mobile ATM booth in Bangladesh as well as donates Tk. 9.73 crore for the Dhaka University Research Center.
It is committed to fill its customer needs and satisfactions. It wants to pave the way of a new era in banking. Which marques,"Your Trusted Partner."
It consists of a very intelligent experienced board of directors. Mr. Abedur Rashid Khan is the chairman of Dutch Bangla Bank Limited. It includes nine directors who are very skilled in their respective area. With the supervision of these scholars, it introduces electronic banking for the first time in Bangladesh. For this reason, now one client of Dutch Bangla Bank Limited can access his/her account from any DBBL branch. It costs a lot of investment to facilitate its customers than any other solutions. But it was taken only for the benefits of the customers. Dutch Bangla Bank Limited is making the largest IT budget in Bangladesh now maintaining the state of the art E-Banking division. It is the only bank which has a off side Data Recovery site (DRS). It means that customer records are always safe, backed up and up to date.
For the benefit of the mobile banking customer can perform any banking operations with their phone. It is the primary license holder for the Visa and Mustercard.
Although Dutch Bangla Bank Limited doesn't concentrate on profit seeking but its really profitable. The total revenue of Dutch Bangla Bank Limited in 2009 is about Tk.9000 million. The total assets are about Tk. 81,980.53million in 2009. The total amount of loans and advances is Tk.48410.99 million in 2009. The total amount of deposits is Tk.67688.53 million in 2009. The return on equity is about 30% in 2009. The return on assets is 1.65% in 2009. The earning per share is about Tk.75.85. The total amount of import is 53088.66 million which is the largest amount in the history of Dutch Bangla Bank Limited and the total amount of export is about Tk. 41162.51 million. The operating profit is 2695.72 million taka in 2009. Profit before tax is 2154.35 million taka. Profit after tax is 1137.70 million taka. Total risk weighted assets is 50913.48 million taka. Loan deposit ratio is 71.41%.Return on total assets is 1.6%. Return on risk weighted assets is 2.23%. Return on equity is 30.28% and capital adequacy ratio is 11.59%.
Dutch Bangla Bank Limited has become one of the leading commercial bank in Bangladesh overcoming all the obstacles to establish rapid growth since the year 2000. It takes its reputation through social work rather than profits for having conservative nature, long-term strategies, hefty social donations and technology investments. That's why it is getting the modest but steady profits. For this reason it is known to all as conservative in its banking practices. Much of the success and strategy has come from the contribution of the leadership of the founder chairman, M Sahabuddin Ahmed.
Inspite of being the largest donor in Bangladesh, investor confidence was unhindered. In March 2008, the prices of the share of Dutch Bangla Bank Limited reached Tk. 14325.80 in the Dhaka Stock Exchange, setting the record for the highest stock price in the history of Bangladesh. It is one of the few banks which doesn't participate in merchant and investment banking.
DBBL is maintaining only its own network and automation without the participation of any third party companies. Accessing in ATM services is free for DBBL customers. Partner banks are being charged an extra service charge of Tk. 10, though the last price for the customers may be higher because of the extra charges given by partner bank.
DBBL has over 1062 ATM's installed all over Bangladesh. It is the largest network by a large margin. In 2010 DBBL declared the biggest expansion goal for its network. It also stated that it has no intention of introducing any charges.
The partner banks who have signed agreements to share DBBL's ATM network (Up to May 2009):
Citibank Limited.
Standard Chartered Bank (SCB)
Commercial Bank of Ceylon
Mutual Trust Bank
Bank Asia
National Credit and Commerce Bank Limited.
Prime Bank
United Commercial Bank Limited (UCBL)
Southeast Bank Limited (SEBL)
First Security Bank
Trust Bank
Mercantile Bank
Q-Cash network Banks (1. Janata Bank 2. Eastern Bank 3. IFIC Bank 4. AB Bank 5. Shahjalal Islami Bank 6. Basic Bank 7. Jamuna Bank 8. Mercantile Bank 9. National Bank 10. National Credit and Commerce Bank 11. Pubali Bank 12. Sonali Bank 13. Trust Bank 14. Uttara Bank 15. State Bank of India 16. The City Bank 17. Social Islami Bank)
Dhaka Bank
EXIM Bank
Dutch Bangla Bank admires social work and is one of the largest private donors in Bangladesh. According to the vision of M Sahabuddin Ahmed, it is contributing through its foundation called Dutch Bangla Bank Foundation. For giving these kinds of service the organization has been granted numerous national and international awards. M Sahabuddin Ahmed established Dutch Bangla Bank Foundation in order to help the people of Bangladesh. The total amount of donation given by the DBBL is exceeding BDT 1.3 billion.
The bank has been donating mainly to social awareness programs, medical and educational fields. DBBL is also maintaining the largest scholarship program in Bangladesh.
DBBL won the Bangladesh Business Awards for becoming the 'Best Financial Institution' for its commitment to technology and community service in 2007. DBBL declared a donation of Tk 100 million to fund the construction of the 11 storied research center named "Dutch-Bangla Bank Research Centre for Advanced Research in Arts and Social Sciences" at the Dhaka University campus in Dhaka, Bangladesh. It was the largest donation from a private company to Dhaka University. It is also awarding scholarship to researchers and scholars at home and abroad.
Analysis of Risk Management
The potential losses or foregone profits that can be triggered by internal and external factors 5s called risk. The objective of risk management is to identify of potential risks in our operations and transactions, in our assets, liabilities, income, cost and off-balance sheet exposures and independent measurement as well as assessment of such risks and to take timely and adequate measures to overcome the risk in a risk return framework.
While conducting banking business to hit a balance between risk and return only the calculated risk are taken then risksare identified, mitigated or minimized and if possible removed protecting capital as well as to maximize value for shareholders. It is the duty of risk management committee to ensure that balance sheet and off-balance sheet risks taken by the Bank are consistent with risk appetite and strategic objectives of the Bank.
While mitigating all kinds of potential risks in banking operations a wide range of tools and techniques are used. The Bank gives top priority to set up, maintain and upgrade risk management infrastructure, systems and procedures. For this reason, enough resources are distributed to improve skills and expertise of related banking professionals to manage the risk. The board of director approves the policies and procedures to assess on a regular basis to achieve the level of satisfaction required to manage & mitigate the risks.
The total responsibility for effective risk management depends on the Board of Directors of the bank. The Board and committees like Audit Committee and Executive Committee, set principles and limits, review and monitor various risks. The duty is to assess adequacy of system and to ensure that the Bank is operating within approved systems & procedures. Management committees, like ALCO and Credit Committee, also oversee that sufficient risk management systems are set up in place and these are applied to check the interest of the Bank.
To ensure the risks which are properly addressed and protected for sustainable development of the Bank, there are approved policies and procedures covering all the risk areas i.e. credit risks, operational risks and market risks. These are formulated taking into account Bangladesh Bank's Guidelines for Managing Core Risks on Credit Risk Management, Internal Control & Compliance, Asset and Liability Management, Foreign Exchange Risk Management and Money Laundering Risk Management as well as the business environment in which the Bank operates, specific needs for particular type of operations or transactions and international best practice. These policies are regularly reviewed and updated to keep pace with the changing operating environment, technology and regulatory requirement. Meticulous compliance with the established procedures are ensured to satisfy that the Bank is operating within approved procedures and limits and that risks are within tolerable limits to effectively ensure long term solvency and sustainable growth of the Bank.
The combination of board, its committee, management committee, management units and internal control and compliance division approve, monitor, and mitigate risk management procedures at various stages of the bank.
Board of directors oversee and approve all major risk management policies, regulatory requirement and lessons learned in the past. The bank has to maintain operational and market risksfor ensuring smooth banking operations in the time of setting policies as well as protecting against down-side risk from potential losses or foregone revenue and to check interest of shareholders and depositors.
Executive Committee of the bank is responsible to ensure that the management isoperating within approved limitations and authorities and all the major risks are managed & mitigated and potential and actual losses arising from risks are within accepted limitations. The Committee approves credit proposal, administrative proposal and major purchase as scheduled by the Management Credit Committee, Management Committee and Management Purchase Committee.
Audit Committee freely notices all the activities of banking operations including credit risks, operational risks and market risks through internal control and compliance division of the Bank. The committee approves risk based audit plan for IC &CD and implementation of the plan is monitored on a regular basis to ensure that all risk factors are addressed quickly as a correct form to ensure sustainable operation of banking activities.
The compliance with all related risk management policies and strategies are likedby the Credit Committee, Asset-Liability Management Committee and Purchase Committee.
Risk management policies, systems and compliance are ensured by the Management units like Credit Risk Management Division, Treasury Division, Credit Administration Division, Credit Monitoring & Recovery Division etc. with all approval of limitations and procedures at operational levels.
Internal Control & Compliance Division independently verifies compliance with all approved risk management and internal control policies. Deviations are to be identified, reported and corrected to minimize risks on a continuous basis and to ensure that the Bank is operating in compliance with all approved and established policies. Internal Control& Compliance Division reports to the Audit Committee of the Board.
Operation and performance of loans are monitored time to time for mitigating early warning system to address the loans whose performance show any deteriorating trend to ensure higher quality and lower risk with the ultimate objective to protect the interest of depositors and shareholders.
Credit risk is the most important risk in banking business. Every loan exposure involves the Bank to some degree of credit risks. Credit Risk Management is in the heart of the overall risk management system. It is designed and updated to identify, measure, manage and mitigate credit risk for maintaining and improve quality of loan portfolio and reduce actual loan losses and to ensure approved processes are followed and appropriate due diligence are made in approving new credit facilities.
The Executive Committee of the Board and appropriate level of management are given to delegate credit approval authorities to strike a balance between adequate control and flexibility in credit operations to ensure full credibility and accountability at all levels.
The Board of internal control and compliance approves the major policy guidelines, growth strategy, exposure limits for particular sector, product, individual company and group, keeping regulatory compliance, risk management strategy and industry best practice.
There is an independent credit risk management division to trigger credit risks and suggest mitigations before the recommendation of every credit proposal.
A separate Credit Administration Division confirms the security documents are in place before disbursement. DBBL is regularly maintaining a unique process of rechecking security documentation by a second legal adviser other than the lawyer who vetted it originally.
The performance and recovery of loans are monitored by An independent and fully dedicated credit monitoring and recovery division. The work of the committee is to identify early signs of delinquencies in portfolio and take corrective measures to mitigate risks, improve loan quality and to ensure recovery of loans on time including legal actions. This department monitors risk status of loan portfolio at the same time ensures adequate loan loss provision. A dedicated and high-level management recovery committee is fixed up to deal with the problem loans for early and most appropriate settlements.
Interest accrued on classified loan is disbursed and adequate provision is maintained against as per Bangladesh Bank's Guidelines.
Internal Control & Compliance Division verifies and ensures at least once in a year, compliance with approved lending guidelines, Bangladesh Bank guidelines, operational procedures, sufficiency of internal control and documentation. Internal Control& Compliance Division reports it to the Audit Committee of the Board.
Overall quality of the customers who has taken the loan from the bank, performance, recovery status, risks status, and sufficiency of provision of loan portfolio is regularly reported to the Board of Directors/Executive committee for information and guidance.
The liquidity, interest rate and foreign exchange risks with oversight from Asset-Liability Management Committee (ALCO) are managed by the Treasury Divisions which is chaired by the Managing Director including top management and senior executives of the Bank. The Committee call the meetings at least once a month. All risk management policies, setting limits and reviewing of the compliance on a regular basis are done by the board. The overall objective of the bank is providing cost effective funding to finance the asset growth and trade related transactions, optimize the funding cost, increase spread with the lowest possible liquidity, maturity, foreign exchange and interest rate risks.
Liquidity risk is defined as the risk what we may not meet our financial obligation as they become due. Liquidity risk includes our inability to liquidate any asset at reasonable price in a timely manner. It is that policy of the Bank which is used to maintain adequate liquidity at all times and in both local and foreign currencies. The banks managed liquidity risks on a short, medium and long-term basis. There are approved limitations for credit-deposit ratio, liquid assets to total assets ratio, maturity mismatch, commitments for both in on-balance sheet and off-balance sheet items and borrowing from money market to ensure that loans and investments funded by stable sources, maturity mismatches are within limits and that cash inflow from maturities of assets, customer deposits in a particular period exceeds cash outflow by a comfortable margin even under a stressed liquidity scenario.
Market risk is defined as the risk of losses in on and off-balance sheet positions which arises from the movement in market price such as changes in interest rate and price of equity, foreign exchange and commodity.
Foreign exchange risk is defined as the potential loss arising from changes in foreign currency exchange rate in either direction. Assets and liabilities which are denominated in foreign currencies have foreign exchange risks.
In order to further expansion of the foreign exchange risk management, DBBL has strengthened and restructured its dealing room with the help of advanced technological equipment and experienced personnel. The Bank is operating its foreign exchange and money market activities under a centralized and single functional area. The Exchange Rate Committee of the bank meets on a daily basis to review the prevailing market condition, exchange rate, exposure and transactions to mitigate foreign exchange risk.
The potential reduction in net interest income caused by changes in the level of interest rates is called interest rate risks. It is ensured that the Bank is not subjected to undue interest rate risks due to interest rate mismatch and maturity mismatch. The assets are not financed which are of fixed rate by floating rates liabilities or vice versa.
Operational risk is the risk of loss resulting from insufficiency or failure of internal processes, systems and people or from external events.
The Board of Directors has approved updated policy guidelines on Internal Control & Compliance Risk (ICC). Management is restructuring the organizational chart of the Bank in accordance with the instructions of Bangladesh Bank for managing core risks. Alongside of aforesaid policy guidelines, Bank's own working manual on ICC has been approved by the Board of Directors of DBBL and the manual is now in operation.
Internal Control & Compliance Division of the Bank under direct supervision of Audit Committee of the Board has been implementing detail guidelines on ICC risk management to assess and mitigate risks. It is working as a part of it the IC&CD has been divided into three (3) independent units and they are:-
a) Audit & inspection unit
b) Monitoring unit
c) Compliance unit
The units have been functioning separately with directly reporting lines to the Head of Internal Control and Compliance Department.
Departmental Control Function Check List has been introduced in the branch offices and divisions at Head Office under direct supervision of Monitoring Unit of IC&CD which is ensuring compliance with regulatory rules and regulations as well as general banking norms and procedures.
Documental Check List has been brought in practice under the supervision of dedicated units. Exceptions are addressed for monitoring and correcting on a regular basis.
Policy guidelines on RISK BASED INTERNAL AUDIT (RBIA) system have been formed and the branches have already been brought under RBIA networks. According do RBIA, marks have been allocated for rating of the branches in terms of business risk and control risk. The branches which score high are being subjected to more frequent audits.
It is a Policy of the Bank to put all branches of the Bank under any form of audit once in a year and IC&CD is working in that direction.
All these activities of the Internal Control & Compliance Division are dedicated to introduce and mitigate operational risks of the Bank in more effective way to ensure efficiency and effectiveness of performance, ensure reliability and completeness of financial and management information and to ensure compliance with legal and regulatory requirements.
For preventing Money Laundering had become a burning issue in the beginning of this century, Money Laundering Prevention Act, 2002 was made in our country to give tight rein on money laundering process. Bangladesh Bank also undertook a project in the year 2003 to review the global best practices in the risk areas in the view of globalization of business and identified 5 (five) core risks for implementation by the banks which included, among others, Money Laundering risk.
Alongside with the money laundering law and relevant guideline of Bangladesh Bank on Money Laundering risk, our Bank has already formulated guidelines on policies & procedures for the prevention of Money Laundering. The prime objectives of the guidelines are to fight Money Laundering which became rampant in recent years.
As the guidelines, Account Opening Form of our Bank has been redesigned with provision for obtaining particulars of Personal Identity of customers and transactions Profile. The Bank has also undertaken increased due diligence in case of opening of accounts of Politically Exposed Persons( PEP) as per directive of Bangladesh Bank which is in line with recommendation of Financial Action Task Force of U.N. Anti Money Laundering units have been set up in all of the branches under a central unit at Head Office. Basic training has been made mandatory for all the officers of the Bank on compliance with rules and regulations of Money Laundering Act so as to prevent opening of suspicious accounts and identify suspicious transactions.
In Dutch Bangla Bank Limited legal risk isrecovered by recognizing probable losses from litigation or possible litigation at an early stage and by formulating solutions for decreasing, restricting and avoiding such risks and creating adequate provision against the risks.
Business risk is defined as the risk of losses which arises from lower non-interest income and higher expenses from the budgeted amount. The business risk results from the market condition, customer behavior or technological development that may change compared to the assumptions made at the time of planning.
Business risk is managed setting clear targets for peculiar business units in term of business volume, income, cost, cost / income ratio, quality of assets etc. with an ongoing process of continuous development.
Reputational risk is the risk of losses, falling business volume or income as well as reduced value of the company which arises from business events that may reduce the confidence of the customers & clients, shareholders, investors, counterparties, business partners, credit rating agencies, regulators and general public.
The branches and operational divisions are responsible for reputational risks which arise from their business operations. Reputational risks may arise from other risks and even increase those risks. The management works for ensuring that the bank is aware of any changes in market perceptions as soon as possible. All business policies and transactions are subjected for careful consideration. DBBL takes necessary precautionary steps to avail business policies and transactions that may result in important tax, legal or environmental risks. Reputational risks are also factored into major credit decisions that may lead to credit proposal being declined.
The success of Dutch Bangla Bank Limited depends on the trust and confidence of our existing and potential customers, our shareholders, our staff, our regulators and the general public in our integrity and ethical standard. This confidence is largely dependent on meticulous compliance with applicable legal and regulatory requirements and internal policies of Dutch Bangla Bank Limited. The confidence also depends on confirmation with generally accepted market norms and standards in our business operations. The Board of Directors is responsible from the very beginning for compliance with all applicable norms and regulations. The Board decentralizes its responsibilities itself and through delegation of authorities to Executive Committee and Audit Committee of the Board. The objective of the board is to identify any compliance risks at an early stage that may undermine the integrity and the success of DBBL and to mitigate the risks in most appropriate way.
The Bank is committed to maintain a strong capital base for the support of business growth, comply with all regulatory requirements, obtain good credit rating and CAMELS rating and for having a cushion to absorb any unforeseen shock arising from credit, operational and market risk. The Bank is maintaining a dividend policy that will ensure satisfactory return for shareholders as well as sustainable growth of the Bank with strong capital adequacy ratio to check greater interest of depositors and shareholders.
The Board of capital plan and management is responsible for ensuring capital management within a framework of risk management.
Conclusion
DBBL has structured a high powered risk management unit(RMU) for facing effective risk management of the bank. And it is guided by the Bangladesh Bank's terms and references and organizational structure. This team is ready to identify any top risk and responsible for risk management. There are top five risk management challenges for the global banks. They are asked for those such as,
Dealing with regulatory or certainty.
Anticipating new capital requirements.
Shifting the risk culture.
Navigating the fluid economy.
Preparing the balance sheet.
But the question is how a branch office or all offices can take action against risks such as credit risk, liquidity risk, foreign exchange risk, market risk, operational risk etc. Besides these, there are some other risks such as internal control and compliance risk, personal risk, money laundering risk, legal risk, business risks, reputational risks etc. For our research we have gone to the Dutch Bangla Bank Limited Mymensingh Branch and talked to one of the officers named Mr. Hasanuzzaman about risk management policy. We have come to know about the strategies of the Dutch Bangla Bank Limited for risk management. Mainly we talked about credit risk. When the bank can be ensured that one loan given by them is going to be bad or have already become bad then they call the client. It reschedules the loan for a long period. The total amount of bad of Dutch Bangla Bank Limited is 0.3%. When a loan is becoming doubtful then the bank give follow up to that client. The follow up style is such as they communicate with the client time to time through mobile phone. Sometime a banker gives loan to those kinds of customer who is known to the manager. He gives the loan to that client of his own risk. If the client cheats with the bank then the manager is responsible for that loan. The total profit of the bank was 400 crore taka last year but the mymensingh branch was in loss. Because they could not provide a standard service for their clients and customers. In this type of case the manager is responsible. But the main branch took the responsibility when a branch faces certain extreme loss. To manage risk which is very complex then the manager calls a meeting of the seniors and take action against the risk. When a branch faces a great risk or trouble then the head office takes the responsibility of that branch and gives no more time to that manager.
