Bangladesh Bank regulates and supervises the banking companies of the country vide Bangladesh Bank Order, 1972 and Section 44 of the Bank Companies Act, 1991.
Department of Banking Inspection-2 supervises the activities of six State-owned Commercial Banks (SCBs) [Sonali Bank Limited, Janata Bank Limited, Agrani Bank Limited, Rupali Bank Limited, Basic Bank Limited, Bangladesh Development Bank Limited] and one State-owned Financial Institution [Investment Corporation of Bangladesh]". This department on sample basis examines the books of accounts and related documents/records of these banks and FI with a view to ascertain their financial soundness, quality of portfolios, management efficiency and risk exposure so that their operations cannot be detrimental to depositors' interest in general and to the economy as a whole
This department conducts following types of inspections:
- Comprehensive/Regular/Traditional Inspection
- Risk Based Inspection, and
- Special inspection/Surprise Inspection.
Comprehensive inspections are conducted by this department as per inspection program prepared annually. Some key areas of comprehensive inspection are:
- Evaluation of assets giving emphasis on classification and provisioning;
- Assessment of regulatory capital requirement;
- Verification of window-dressing relating to profit;
- Review of liquidity position;
- Evaluation of loan operation;
- In-depth analysis of large loans and concentration of credit;
- Detection of fraud, forgery, and actions taken against thereof;
- Evaluation of quality of corporate governance and customer services; and
- Compliance with various guidelines/instructions/circulars issued by Bangladesh Bank as well as other regulatory authorities (e.g. Ministry of Finance, National Board of Revenue, Registrar of Joint Stock Companies and Firms, Bangladesh Securities and Exchange Commission, etc.).
Risk based inspections are conducted yearly on core risk areas. These inspections are conducted covering following key risk areas:
- Credit Risk Management (CRM)
- Internal Control and Compliance (ICC)
- Asset-Liability Management (ALM)
- Information and Communication Technology (ICT)
- Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) System
Special inspections are conducted beyond routine programs, such as on weaknesses/risk areas identified from information submitted by the banks through statements/reports, Integrated Supervision System (ISS), Enterprise Data Warehouse (EDW), etc. or as per instruction of appropriate authority.
Inspection reports are prepared by the inspection teams incorporating their findings and recommendations are solely meant for compliance by the banks. Based on the findings of the inspection, banks are assigned supervisory ratings using the CAMELS supervisory model.
The Department also examines and monitors the compliance of findings of inspections and whether the bank's actions are adequate/appropriate in respect of the implementation of the recommendations given in the inspection reports. On various circumstances banks are informed the major areas of supervisory concern that need immediate rectification. If necessary, supervisory discussions are held to ensure drawing up of specific, time-bound and achievable action plan. Moreover, a specific unit, namely Enforcement and Implemantation Monitoring Unit (E&IMU), is assigned for intense monitoring of the compliance status of the banks.