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Risk Management Division
As per instruction of Bangladesh Bank “Risk Management Unit” of the Bank has been restructured as a fully functional division named as “Risk Management Division” which has been approved by the board of directors of the bank in 285th board meeting held on 12.03.2013 for smooth operation and management of risk issues. The division has been staffed with some experienced officials headed by a Senior Vice President whereas a Deputy Managing Director (DMD) is acting as Chief Risk Officer (CRO). The division works with the capital management issues and risk management activities of the bank as per the guideline of Bangladesh Bank, Management level Risk Management Committee and Risk Management Committee of the Board.

The risk management of the Bank covers a wide spectrum of risk issues and the 6 (six) core risk areas of banking i.e. investment risk, foreign exchange risk, internal control & compliance risk, money laundering risk, ICT risk and asset liability management risk. SIBL is much concerned about the business risk and its proper management so that the risk and return could be optimized. Our policy envisages that the management would pay special attention to manage and reduce the risk to an acceptable level apart from prudent controls over the Bank's assets.
The functions of the Division are summarized as follows:
Calculating Minimum Capital Requirement (MCR) under Basel III,
Conducting Supervisory Review Process through Internal Capital Adequacy Assessment Process (ICAAP),
Disclosing related information as per the instruction of Pillar III of Basel-III framework.
Conducting Stress Testing
Preparing Risk Management Paper
Co-ordination and Monitoring of the core risks.
   - Investment Risk Management
   - Asset-Liability Risk Management
   - Foreign Exchange Risk Management
   - Anti Money Laundering Risk Management
   - Internal Control & Compliance Risk Management
   - Information and Communication Technology Security Risk Management
   - Environmental Risk Management
Co-operation with Credit Rating etc.
Management Level Risk Management Committee
For smooth functioning of risk management activities of the Bank, a Board level and a Management level Risk Management Committee is working in the Bank. The Management level Risk Management Committee is headed by the Managing Director & CEO of the Bank and formed as per the TOR of Bangladesh Bank and conduct minimum one monthly meeting to discuss the main agenda of the meeting- ‘Monthly Risk Management Paper (MRMP)' which is specially designed by Bangladesh Bank and contains various analysis and information that covers a wide areas of the Bank's credit risk, market risk, operation risk including ‘six core risks'. As per regulations of the Bangladesh Bank, this committee analyses all the information contained in MRMP and submit it to the Bangladesh Bank and Bangladesh Bank monitors and instructs the bank on any particular risk issue. Apart from MRMP, Comprehensive Risk Management Papers (CRMP) is prepared and placed to this committee on half yearly basis. Both MRMP and CRMP also submit to the board risk management committee for their review and approval.
Functions of the committee are as under:
Designing bank's overall risk management strategy;
Establishing risk management policies and procedures;
Developing and overseeing implementation of stress tests;
Developing, testing, and observing use of models for measuring and monitoring risk;
Informing the board about the appetite for risk across the bank;
Communicating views of the board throughout the bank;
Independently monitoring limits, in addition to the monitoring that is done by business units;
Formulating guidelines on the handling of all property and liability claims involving the organization;
Developing and implementing loss prevention/loss retention programs;
Identifying and quantifying bank's exposures to material loss;
Securing and maintaining adequate loss coverage at the most reasonable cost;
Adopting proper financial protection measures through risk transfer, risk avoidance, and risk retention programs;
Determining the most cost-effective way to construct, refurbish, or improve the loss protection system of any facility leased, rented, purchased, or constructed by the bank;
Managing claims for insured and uninsured losses; and
Participating on all contract negotiations involving insurance, indemnity, or other pure risk assumptions or provisions prior to the execution of the contracts.
The Management level Risk Management Committee is consists of the following senior officials of the Bank:
01. Mr. Md. Shafiqur Rahman Managing Director Chairman
02. Mr. Md. Yunus Ali Deputy Managing Director Chief Risk Officer
03. Mr. Walid Mahmud Sobhani Senior Executive Vice President Head of Financial Administration Division & Member
04. Md. Md. Shafiqul Islam Senior Executive Vice President Head of Branches Control, General Banking and Marketing Division & Member
05. Mr. Gazi Mohammad Hasan Executive Vice President Head of Investment Administration Division & Member
06. Mohammad Shoeb, FCA Senior Vice President Head of Risk Management Division & Member Secretary
07. Mr. Md. Sultan Badsha Senior Vice President Head of Information Technology Division & Member
08. Mr. Zahurul Islam Khondker Executive Vice President Head of Internal Control and Compliance Division & Member
09. Mr. Md. Akmal Hossain Senior Vice President Head of International Division & Member
Basel Accord Implementation Status of the Bank:
Implementation Status of Pillar I of Basel III
Bank Companies Act, 1991, and Risk Based Capital Adequacy (RBCA) guidelines of Bangladesh Bank require maintaining capital adequacy to operate banks in Bangladesh. From January 2015, capital is maintained as per the RBCA guideline of Bangladesh Bank in line with Basel III capital adequacy framework. As per RBCA guideline of Bangladesh Bank the banks are required to submit the report on capital adequacy on quarterly basis to the Department of Offsite Supervision of Bangladesh Bank.

The comparative position of capital adequacy of Social Islami Bank Limited up to 30th September 2015 for the year 2015 is as follows:
(Figures in Crore)
Particulars 31-03-15 30-06-15 30-09-15
A. Total Regulatory Capital :
  1. Tier-1 Capital (Going Concern Capital ) 1145.87 1005.93 1027.45
    a) Common Equity Tier-1 Capital (CET-1) 1145.87 1005.93 1027.45
    b) Additional Tier-1 Capital (AT-1) 0 0 0
  2 .Tier-2 Capital (Gone Concern Capital) 477.00 480.75 487.34
  3. Total Regulatory Capital (1+2) 1622.87 1486.68 1514.79
B. Total Risk Weighted Assets (RWA): 11970.37 12283.15 12727.61
C. Capital to Risk Weighted Assets Ratio (CRAR) (A3 / B)*100 13.56% 12.10% 11.90%
D. Common Equity Tier-1 Capital to RWA (A1a / B)*100 9.57% 8.19% 8.07%
E. Tier-1 Capital to RWA (A1 / B)*100 9.57% 8.19% 8.07%
F. Tier-2 Capital to RWA (A2 / B)*100 3.98% 3.91% 3.83%
G. Minimum Capital Requirement 1197.04 1228.32 1272.76
H. Capital Maintained 1622.87 1486.68 1514.79
I. Excess /(Shortfall) 425.83 258.36 242.03
J. Minimum CRAR 10% 10% 10%
K. Maintained CRAR 13.56% 12.10% 11.90%
Implementation Status of Pillar II of Basel III:
Supervisory Review Process (SRP) and Supervisory Review Evaluation Process (SREP) dialogue on ICAAP is the second pillar of Basel II and Basel III. ICAAP report represents the adequate capital requirement in addition to minimum capital requirement considering all risk associated with the Bank. Minimum capital requirement is calculated considering credit risk, market risk and operational risk of the bank whereas residual risk, concentration risk, liquidity risk, strategic risk, reputation risk, appraisal of core risk management, settlement risk, environmental and climate change risk and other material risks are considered to determine the adequate capital. Accordingly a capital growth plan is also provided to with the ICAAP reporting. In the ICAAP report of the year 2014, it is found that bank needs to maintain the adequate capital against residual risk, concentration risk, and strategic risk of BDT 117.89 crore.
As on 31st December 2014, bank maintained BDT 1307.82 crore whereas as per our calculation in ICAAP report, adequate capital requirement is BDT 1246.05 crore.
Comparative position of Capital of the Bank:
Fig in Crore Taka
Dec'11 Dec'12 Mar'13 June'13 Sept'13 Dec'13 Dec'14 June'15 Sept'15
Capital Required 723.89 919.83 968.47 949.35 973.66 1001.37 1151.12 1228.31 1272.76
Capital Maintained 953.45 1059.65 1078.72 1065.52 1075.66 1175.78 1307.82 1486.68 1514.79
Capital Adequacy Ratio (CAR) Requirement 10% 10% 10% 10% 10% 10% 10% 10% 10%
Capital Adequacy Ratio Maintained (CAR) 13.17% 11.52% 11.14% 11.22% 11.05% 11.74% 11.36% 12.10% 11.90%
Stress Results
CAR after minor combined shock 12.20% 10.05% 10.03% 10.26% 10.03% 10.23% 10.29% 10.83% 10.49%
CAR after moderate combined shock 11.61% 6.94% 7.16% 7.37% 6.80% 8.63% 6.42% 6.54% 5.38%
CAR after major combined shock 8.21% 2.24% 2.97% 3.27% 2.41% 3.54% 2.08% 1.51% 0.15%
Transitional arrangements for implementing Basel III in Bangladesh:
In line with the Basel framework, Bangladesh Bank issued transitional arrangements for Basel III implementation in Bangladesh. The phase-in arrangements for Basel III implementation in Bangladesh will be as follows:
Table 1: Phase-in arrangements for Basel III implementation in Bangladesh
2015 2016 2017 2018 2019
Minimum Common Equity Tier-1 (CET-1) Capital Ratio 4.50% 4.50% 4.50% 4.50% 4.50%
Capital Conservation Buffer - 0.625% 1.25% 1.875% 2.50%
Minimum CET-1 plus Capital Conservation Buffer 4.50% 5.125% 5.75% 6.375% 7.00%
Minimum T-1 Capital Ratio 5.50% 5.50% 6.00% 6.00% 6.00%
Minimum Total Capital Ratio 10.00% 10.00% 10.00% 10.00% 10.00%
Minimum Total Capital plus Capital Conservation Buffer 10.00% 10.625% 11.25% 11.875% 12.50%
Phase-in of deductions from CET1 Not Applicable
Phase-in of deductions from Tier 2 Revaluation Reserve (RR)
    RR for Fixed Assets 20% 40% 60% 80% 100%
    RR for Securities 20% 40% 60% 80% 100%
    RR for Equity Securities 20% 40% 60% 80% 100%
Leverage Ratio 3% 3% 3% Readjustment Migration to Pillar 1
Liquidity Coverage Ratio ≥ 100%
(From Sep.)
≥ 100% ≥ 100% ≥ 100% ≥ 100%
Net Stable Funding Ratio > 100%
(From Sep.)
> 100% > 100% > 100% > 100%
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