Chapter – One

Introduction

1.1 Origin of the report

1.2 Objectives of Study

1.3 Methodology of the study

1.4 Limitations of the study

 1.1 Origin of the report

The report is conducted for the requirement of “Internship program” for carrying out the degree
of BBA. The internship program is planned to give some opportunities to me to obtain some
theoretical and practical knowledge as an intern. My supervisor, Mohammad Mamun Ur
Rashid has provided massive assistance and gives me valuable suggestions to conduct the
report
on “Risk Management Practice in National Bank Limited’’.

1.2 Objectives of the Report

1. Broad Objective

The broad objective of this report is to assess and analyze the total Risk Management practice in
National Bank Limited.

2. Specific Objectives

 Risk management practice identification to evaluate how they manage their risk in
accordance to the guidelines given by Bangladesh Bank.
 Assessment of risk identification process, risk management and mitigation methodology and
risk reporting procedures.
 Risk management framework identification and know about how they segregate their duties
and responsibilities according to its risk management committee and their sub-committee.
 A broad investigation about what kinds of risks the bank faces and how does it mitigate these
risks.
 Measuring and evaluating the effectiveness of the risk management framework in terms of
quantitative data.
 1.3 Methodology of the study

I have decided to collect various types of primary and secondary data to conduct my report on
risk management practice in National Bank Limited. Then the data were organized and
structured in term of the requirement of the study.

Nature of the study

To make a report on a specific topic, First of all, one should make sure what type of study will
conducted. It is a descriptive study. Here I used both qualitative and quantitative data.

Sources of Data

Data collection is very essential for preparing a report .To collect data, One should find out the
sources of data. In order to make the report more meaningful I have used two types of sources.
These are –

Primary Sources
Official Records and core guidelines and Regulations book of National Bank Limited.
Practical participation in internship program
Face-to-Face conversation with the respective officers of different desks of Malibagh Branch

Secondary Sources:
 Risk Management guidelines provided by Bangladesh Bank.
 Annual Reports of National Bank, 2016 (audited financial statement of 5 years)
 Research papers, Relevant books and reports, Newspapers and Journals.
 Website of National Bank Limited
Population size

NBL has contributed to the banking industry since 1983. I have chosen the information from the
glories performance of 35 years of the bank.

Sample Size

I have selected five years’ data from 2012 to 2016 of National Bank Limited.

Sampling design

The study is conducted by the compatible sampling method where all the subjects related to it are
invited to participate.

Data Analysis Tools

To analyze and assess the data to present them as understandable, some risk management tools
and techniques are used such as-
 Use of different risk mitigating ratio
 Tables, Bar Charts, Diagrams and Figures
 Microsoft Excel is used to calculate ratio and constructing the graphs and charts.

1.4 Limitations of the Report

There can hardly be found any kind of work which has no limitations. So, the study has its own
limitations. They are listed briefly below:

 Time constraint is the most important limitation in the internship program. Because 3
months are not enough to measure and evaluate a huge organization like NBL.
 The officials of the branch were only 20 where they needed minimum 30 members. So,
data collection process was badly influenced due to their busy working schedule.
 The responsible officer and authorities were sometimes reluctant to provide some data
because of their confidential rules and regulations.
 Chapter – Two

An Overview of National Bank Ltd.

2.1 History and Heritage

2.2 key areas of NBL
2.3 Mission & Vision
2.4 Commitments
2.5 Profile of Risk Management Department
of NBL
 2.1 History of National Bank Ltd
National Bank Limited has its flourishing past, majestic present, progressing future and under
processing projects and activities .It was Established as the first private sector bank fully owned
by entrepreneurs of Bangladesh, NBL has been working as the largest private sector Bank with
the passage of time. It has been overcoming various stress and strain. A group of creative
businessmen and leading industrialists of the country are the members of the board of directors.
To cope with time and in harmony with national and international economic activities and for
rendering all modern services related to banking industry, NBL, as a financial institution,
automated all its branches with computer networks in according to the competitive commercial
demand of time. Moreover, considering its forth-coming future, the infrastructure of the Bank
has been reorganizing. The expectations of all class businessmen, entrepreneurs and general
public are not less to NBL. At present NBL have 145 branches under our branch network. In
addition, our effective and diversified approach to seize the market opportunities is going on as
continuous process to reach to the new customers by developing and extending rural, SME
financing and offshore banking facilities. We have started 10 branches and 5 SME/Agricultural
branches during 2010.
The origination of National Bank Limited was an important event in the private sector Banking
arena of Bangladesh. When the nation was overcoming a severe recession, the government took
the farsighted decision to permit the private sector to revive the economy of our country. Several
enthusiastic entrepreneurs came forward for establishing a bank with an aim to revitalize the
economy of the country.
National Bank Limited was born as the first hundred percent Bangladeshi owned Bank. From the
very beginning, it was the firm determination of National Bank Limited to play an important role
in the national economy. We are determined to bring back the long forgotten taste of banking
services and flavors. We are determined to serve each one instantly and with sense of dedication
and dignity.

2.2 Key areas of NBL

NBL emphasize on all key areas covering capital adequacy, managing good asset quality, sound
management department, satisfactory liquidity and earning. As a result, it was possible to a
record growth of 175.51 percent with Tk. 8,809.40 million pretax profits in the year under
review over the preceding year. The net profit after tax and provision stood at Tk. 6,860.34
million which was Tk. 2,070.47 million in the previous year registering a 231.34 percent rise.
The total deposits reached to Tk. 102,471.83 million being 33.37 percent increase over the
preceding year. Loans and advances stood at Tk.92, 003.56 million in the year under report
which was Tk. 65,129.289 million representing 41.26 percent rise over the preceding year.
Foreign transection stood at Tk. 144,255.00 million in 2010 compared to Tk. 115,939.00 million,
increased by 24.42 percent compared to that of the previous year. During 2010, the bank handled
inward remittance of Tk. 49,145.30 million, 10.73 percent more than that of the previous year.
Return on Equity (ROE) registered a 77.84 percent rise over the preceding year.
 Now National Bank has acquired strength and skills to support the banking needs of the foreign
investors. NBL has created a new arena of business and initiated its Off Shore Banking Unit at
Mohakhali to serve the wage earners and the foreign investors better than before.

2.3 Mission & Vision

Mission of NBL
The attempt for expansion of our activities at our domestic country and abroad by gathering new
dimensions to our banking services are being continued undivided. Along with, we are also
emphasizing highest priority on ensuring transparency, accountability, improving clientele
services as well as to our commitment to serve the society through which we desire to get closer
and closer to the mass people of all strata. Winning an everlasting seat in the hearts of the people
as a caring companion in uplifting the national economic standard through continuous
improvement and diversification of our clientele services in according to national and
international requirements is the desired goal we want to achieve.
Vision of NBL

Ascertaining highest standard of clientele services through best implication of latest information
technology, making sufficient contribution to the national economy of our country and
establishing ourselves firmly at home and abroad as a top ranking bank of the country are our
cherished vision.

2.4 Commitments

In serving customers In serving the bank In carrying ourselves

at work
Customer-first-Quality- Loyalty total Discipline, Honesty,
focus credibility and Commitment and dedication, Excellence Sincerity, Caring,
secrecy through network Creativity

2.5 Profile of Risk Management Department of NBL

Risk Management encloses all the activities that impact on its risk domain. Risks are generally
defined by the adverse impact on profitability of several distinct sources of uncertainty.
The degree and types of risk that a bank faces depend upon a number of factors such as its size,
complexity of business activities, volume technology operations etc.  Risks are normally
classified within following 3 categories’
                                                                              
Even a single risk may contribute to direct and/or indirect harm to the bank, and business with
financial implications that may be an issue in the short, medium and long term.
 
  

Chapter – Three

Internship Experience

3.1 Internship Duties & Position

3.2 On the Job Training at Malibagh Branch of NBL

 3.1 Internship Duties and Position (7th Jan-21st Jan

I have done my internship program in National Bank Ltd at Malibag Branch. It is one of the
leading commercial private banks in our country. This bank was established in 1983. Their
vision is ascertaining highest standard of clientele services through best implication of latest
information technology, making sufficient contribution to the national economy of our country
and establishing ourselves firmly at home and abroad as a top ranking bank of the country are
our cherished vision.
Especially I want to say about Malibag Branch. This branch is one of the busiest Branches. My
internship program duration was for total 90 days. I went to the Malibag Branch for practical
experience with 90 days where I have learned properly banking system and financial system. I
got a lot of information and gather experience about NBL as well as interest based banking
system. After completion all joining process, I have gone to Malibag Branch.

3.2. On the job training at Malibag Branch of NBL (23rd Jan-1th March)

I worked 90days in this branch. In this branch, there were 20 employees. This branch is very
much clam compare to other Branches. They were very pleased for me. All of them were very
cooperative with me. I was working under several sections which are explained below:

 General Banking (05th Feb-16th Feb)

- Account opening section

I worked total 4 days in this section. This section is one of the busiest sections in this branch.
Because, a new client can enter the banking system, to opening new account. Lot of customer
arrive and try to collect information for account opening. I provided information about the
account opening requirements to their clients. Customers need two copies passport size photo,
NID copy, introducer sign and nominee photo & NID copy for their account opening.

- Cheque Issue & Requisition Section

I worked total 3 days in this section Customer are come to give a requisition when their cheque
page are coming to end. There have a requisition form customer are need to filled that form for
the first time requisition. I write their name, contact number, their account number and finally I
take a signature of account holder in the form.

Many customers arrive to receive their cheque. When cheque comes in the branch I divided them
in different volt. Then I phoned to those customers about arrived their cheque.
 - Information Section

I worked only one day here. Lot of customers arrives every day for collecting information about
the products, facilities, foreign exchange of this branch. Clients wanted to know the balance of
their account by coming to this branch personally or by phone. They come to collect account
statement, certificate, 7 days notice, address change, sign change, account transfer in this section.

- Clearing Section

I worked total 3 days in this section. The main responsibilities were to receive several cheques
from clients. I also attached seal in the front and the back side of the cheque for clearing. My
responsibility was to ensure account number, account holder name, the accuracy of Tk. In figure
& in words which are properly stated in Bank’s cheques. After confirming these cheques were
sent to my boss. He was responsible for entry to the computer & completing other tasks.

- Telegraphic Transfer (TT), Pay Order (PO) & Demand Draft (DD) Section

I worked one day here .When any telegraphic transfer reached to the branch, I enter them in debit
voucher, where I ensure that name, account number, TT number and dates are correctly printed
on the TT Voucher. Hence I make sure the signature of two officers and lastly send this voucher
to the computer department. In PO & DD leaf, where I ensure name of the organization, drawer
branch, date & amount of money and signature of two officers.

 Investment (23rd Jan- 04th Feb)

I worked total 12 days in this section. Although National Bank Ltd (NBL) has been the most
profitable banking organization in Bangladesh since the last few years but it has also got some
limitations. These limitations exist in their operations, management and environment of the
Bank. When I engaged in the NBL Malibag Branch, then I able to talk some of clients,
employees of this Branch and also talk about Banking Activities of this Branch. The investment
procedures, modes of investment & its limitations that are found in the period of my internship
are given below:

- Investment Procedures of NBL

There are three types of investment Mechanism. Every mechanism of investment is strictly
followed investment procedures. These are as follows:

 Selection of the client

 Application stage
 Appraisal stage
 Sanctioning stage
 Documentation stage
 Disbursement stage
 Monitoring and Recovery stage
 Foreign Exchange (17th Feb-1th March)

- Import: L/C opening & Settlement (Cash back to back).

- Export Processing: Function related to export business.
- Remittance Functions related to Foreign Remittance.

Chapter – Four

Analysis & Findings

5.1 Sound Risk Management System of NBL

5.2 Risk Management Framework of NBL
5.3 Risk Measurement of NBL
5.4 Risk Monitoring of NBL
5.5 Ratio analysis
5.6 SWOT Analysis
    5.7 Findings
 4.1 Sound Risk Management System in the Bank
A Sound Risk Management is a System which plays an important role in risk management and it
lies in a successful risk management function which can lead successfully even in more stressful
business conditions. NBL’s risk management policy has been adjoining the following key
elements:
 Risk management framework has been engaging of board and senior management;
 Firms policies and procedures, determination of risk limit and implementation have been
constructed to manage business operations more effectively and efficiently;
 Internal control has been established and the analysis of the performance of
comprehensive audit to find out any shortages in the internal control environment.

Bangladesh Bank gives clear guidelines to the banking industry about the risk associated with
their banking business. it gave advises to them how to identify the risk to take effective measures
to control the risk in the sector of lending, internal control, liquidity and treasury management
within an organization. It also renders broad schemes for the assessment of risk analysis culture,
rating system and loan classification.
 4.2 Risk Management Framework
An asset and liability management committee is formed by every firm. Asset and liability
management committee (ALCO) is the most important unit of the risk management system.
ALCO does the function of management of asset and liability. The bank’s senior management
performs for ALCO and it is leaded by CEO & Managing Director. The committee meets on a
specified time in a month or whenever necessary to assess all the risks and attempts to find out
the ultimate results for mitigating the risks Procedural Framework for ICC Risk
An effective and most efficient control environment is launched in the bank to manage and
control the internal operational activities in a percipient way. NBL’s internal control and
compliance framework is:

4.3 Risk Measurement

Measurement of risk is necessary for mitigating the risk associated with a firm. Proper
identification and measurement of risk is done to have a sound risk management system.
Commonly used methods and tools are followed by NBL to identify and measure underlying
risks in banking activities.

4.4 Risk Monitoring

Risk monitoring is another crucial part of risk management department. Risk is monitored
diligently to accelerate to lessen and eliminate the possibility of loss arising from risks of an
organization. The bank uses different risk monitoring techniques to keep track of the KNOWN
risks, monitor other risks and identify new risks to ensure the accomplishment of risk plans and
evaluate their effectiveness and efficiency in reducing and mitigating risks.

4.5 Ratio analysis

This ratio is used to determine the lending capability of banks. It is measured the liquidity of the
bank by dividing the banks total loans by total deposits.

A too high ratio indicates liquidity problem. It depicts that the bank might not have adequate
funds to cover its demand of the customer.
Calculated as:
𝑪𝒓𝒆𝒅𝒊𝒕 𝑫𝒆𝒑𝒐𝒔𝒊𝒕 𝑹𝒂tio = Loans/Deposits

- Non-performing loans ratio

This ratio is used to determine the proportion of net loans and advances which are not
performing by the bank.
A too high non-performing ratio indicates that the asset quality is reduced and it consequently
affects profitability.
Calculated as:
𝑵𝑷𝑳𝒔 𝒕𝒐 𝒕𝒐𝒕𝒂𝒍 𝒍𝒐𝒂𝒏𝒔 𝒂𝒏𝒅 𝒂𝒅𝒗𝒂𝒏𝒄𝒆 = NPL/loans and advances

- Interest Coverage Ratio

This ratio is used to determine how easily a company can pay interest expenses on outstanding
debt.
The lower the interest coverage ratio , the higher debt expenses.
Calculates as:

 𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝑪𝒐𝒗𝒆𝒓𝒂𝒈𝒆 𝑹𝒂𝒕𝒊𝒐 = 𝐸𝐵𝐼𝑇𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑒𝑥𝑝𝑒𝑛𝑠𝑒𝑠

- Capital Adequacy Ratio
This ratio determines measures the amount of a bank's capital expressed as a percentage of risk
weighted credit exposures. It shows the robustness of a bank to tackle the shocks of its balance
sheet.
It represents the standard used the banks to absorb reasonable level of losses before they become
insolvent.
Calculated as:
𝑪𝑨𝑹 =𝑇𝑖𝑒𝑟 𝑜𝑛𝑒 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 + 𝑇𝑖𝑒𝑟 𝑡𝑤𝑜 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝑅𝑖𝑠𝑘 𝑊𝑒𝑖𝑔ℎ𝑡𝑒𝑑 𝐴𝑠𝑒𝑒𝑡𝑠

4.6 SWOT Analysis

SWOT Analysis is an important tool for assessing the company’s overall performance. It assists
the organization to measure its performance against risk ad improving the condition of the
organizations. It occupies the possible opportunity to use its strength to remove weakness for
facing threats. SWOT stands for

 Strength
Capable employee All the employees of NBL are highly capable and aware of to manage the
risk more effectively.
Risk Management A five-member of the RMC has recently been constructed. They have
Committee been doing their duty to lessen risk as an acceptable risk and reported on a
regular basis.
Internal control and Foreign Exchange Audit, Compliance (External) and Foreign Trade
compliance Monitoring Department have been established to manage the internal
control and compliance.
CAMLCO and CAMLCO in the Head office and BAMLCO in all branches have been
BAMLCO implemented for reducing money laundering risks.

 Weakness

Lack of investment NBL has possessed itself with the implementation of Basel- III frame
in effective control work. They established and supervised a fruitful internal control. It
system requires more investment in technology for the increasing operating
expenses.
Lack of Technology NBL requires more manpower for technology and proper guidelines as
and Manpower well as instructions to do their task.
  Opportunities

Diversified risk NBL has diversified their scope to reduce risk such as Risk
management Management Committee Board, division and branch wise risk
monitoring team. So, they can extend their business in a flexible way
with their flexible risk management committee.
Merchant Banking, Investment in business mainly relies on how one bank can effectively
Diversify into Leasing control their risk. In that case, NBL needs to enhance its business
and Insurance Sector portfolio or commencing merchant banking or diversify into leasing
and insurance sector. It makes them more risk lover with greater
profitability.

 Threats

General business NBL’s growth in business largely lies on the economic condition and
and political political stability of the country. Such as the effect of recession can under
condition grade the business growth at anytime.

Changes in credit Credit quality of a borrower depends on the risk of deterioration, global
quality of economic crisis and supply side distortion. So, more provisioning is
borrowers necessary for distortion as well as the movements in the import prices which
affected the commodity sectors and ship breaking industry greatly.
Changes in Policies and practices of regulatory bodies have a great impact on the
policies and business operations. So, the changes affect in revise practices, pricing and
practices responsibilities of the organizations.

Volatility in The Bangladesh Securities and Exchange Commission (BSEC) and the stock
equity market exchanges developed their supervisory role. But equity market and the
management reports are not stable. It impacts on the performance of the bank
to some great extent.
Under Basel III capital requirement, it is kind of a deathtrap to the financial
organization to keep up sufficient capital against credit risk, operational risk,
market risk, and other residual risks in terms of changing volatility.
Changes in Changes in market conditions particularly interest rates and foreign exchange
market rate greatly influences the deposits and the volatility in foreign remittance. It
conditions exerts pressure on the foreign exchange market and interest rate structure.

Success of NBL’s success largely depends on its successful strategic plan. An improper
strategies strategic plan can impact on the internal and external factors in terms of
financial performance.
Operational risk NBL is using banking software Temenos T24 for performing its operational
activities. It requires more hardware and software support as it is completely
technology based. But it cannot be said that there will be no major failure in
operating system due to fraud and error. These kinds of failure may greatly
effect on business performance.
  

4.7 Findings
NBL has taken several steps to control their risk by the way of their Risk management committee. By
completing the report, I find some important issues which the bank should give more concern-

 NBL has the best practice in risk management in their head offices as well as their branches
offices. The Board of Director has formed a risk management committee with five (5)
members.
 A risk management report has conducted by NBL on monthly and half yearly basis which is a
positive indication for the committee. The Risk Management Committee talks about in monthly
meeting on the report, try to identify the risks and attempt to gives proper direction to lessen
them on a regular basis. They also meet anytime whenever they need to discuss about any
unknown risk.
 The separation of duties and responsibilities of the different level managers is shown by the
risk management framework of NBL. The risk management committee is consisted of one
DMD, one DGM and six GMs. The committee is leaded by DMD and six GMs are handled by
the six-core risk management sub-committees. Member Secretary (DGM of risk management
sector) looks up the entire risk management section.
 NBL has separate mitigation methodology for each risk faced by them. It pursues the
commonly used measures and tools to assess and measure underlying risks in banking
activities. Risk identification, analysis and measurement are the important steps for mitigating
risks.
 The bank uses different risk managing tools to keep track of the KNOWN risks, monitor other
risks and to assess new risks to make sure the accomplishment of risk plans and evaluate their
effectiveness in reducing and mitigating risks.
Chapter – Five

Recommendations & Conclusion

5.1 Recommendations
5.2 Conclusion
 5.1 Recommendations
 NBL should give up regulator guesswork. It has also essential for financial institutions like
NBL to verify that guidelines for exploring a potential upgrade as “clear, clearly
communicated to, and consistently followed in line with risk management guidelines.

 NBL should fix up hard deadlines for every risk arising issues viz. Risk-rating changes,
Charges-offs. It should modernize the core systems to reflect the Risk-rating changes,
determining the loans that needed to be reviewed for impairment (FAS 114), Update the data
on the impairment analyses (appraisal values and selling costs or cash flows).

 NBL must fix up the resources to gain and use risk mitigation weapon efficiently and
effectively to compete in the globalizing economy. For that, it requires adept manpower both
technologies and proper guidelines as well as instructions for properly maintaining all types
of risk.

 NBL should give emphasis on the other risks without only highlighting the core six risks.
They should not forget today’s loss will becomes tomorrows risk.

 NBL should conduct proper “Integrating Risk Appetite, Stress Testing and Capital Planning.
Various committees should charge with different responsibility for mitigation of risk.

5.2 Conclusion
 National Bank Limited has earned the reputation of top banking operation in commercial
bank in compare with others commercial bank in Bangladesh.

 The organization is much more structured compared to any other commercial banks. It is one
of the largest social commercial banks in terms of deposits and loan. It works relentless to
develop new innovation and advancement in banking business. It has a great reputation in the
market as a partner of consumer growth.

 NBL has a good risk management framework. NBL has taken some important strategies to
measure and control the risk associated with the bank. To assess and to control the risk, NBL
has formed a risk management committee comprising 5 members. NBL has also made some
rules and regulations to lessen the risk.
 NBL has a bulk of highly qualified and experienced human resource by which they can take
any opportunity to promote themselves more efficiently and effectively in the banking
industry. It has taken several steps to automate its business process, accounts, data
management etc. to reflect Real Time On-Line Banking by the way of Straight Processing
(STP) and Temenos-24 which is a world class banking solution. It has already been
implemented in 52 branches of NBL

Moreover, it is incomparable with any other banks in the overall-banking sector. Because it
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Attendance Sheet

BUS 431: Internship # Summer-2018

Name of Student :

ID. No : Program:BBA

Name of Supervisor:Mohammad Mamun Ur Rashid, Assistant Professor, DBA, MIU

SL. Date Particulars Signature of Supervisor

01.

02.

03.

04.

05.

06.

07.
 08.

09.

10.

Signature of the student