Report on Credit Risk Management on National Bank Ltd

Topics: Risk management, Debt, Risk Pages: 32 (7311 words) Published: February 26, 2014
1.1 Objective of the study:
The objective of the assignment is to familiarize students with the real business situation, to compare them with the business theories & at last stage make a report on assign task. The study has been undertaken with the following objectives: To analysis the pros and cons of the conventional ideas about credit operation of a Bank. To have better orientation on credit management activities specially credit policy and practices, credit appraisal, credit-processing steps, credit management, financing in various sector and recovery, loan classification method and practices of National Bank Limited (NBL). To compare the existing credit policy of National bank limited with that of best             Practices guideline given by Bangladesh Bank, the central bank of Bangladesh. To identify and suggest scopes of improvement in credit management of NBL. To get an overall idea about the performance of National Bank Ltd.

1.2 Background of the Assignment:
Last year Bangladesh Bank undertook a project to review the global best practices in the banking sector and examines in the possibility of introducing these in the banking industry of Bangladesh. Four ‘Focus Groups’ were formed with participation from Nationalized Commercial Banks, Private Commercial Banks & Foreign Banks with representatives from the Bangladesh Bank as team coordinators to look into the practices of the best performing banks both at home and abroad. These focus groups identified and selected five core risk areas and produce a document that would be a basic risk management model for each of the five ‘core’ risk areas of banking. The five core risk areas are as follows- a) Credit Risks;

b) Asset and Liability/Balance Sheet Risks;
c) Foreign Exchange Risks;
d) Internal Control and Compliance Risks; and
e) Money Laundering Risks.
Bangladesh Bank in one of it’s circular (BRPD Circular no.17) advised the commercial banks of Bangladesh to put in place an effective risk management system by December, 2003 based on the guidelines sent to them. I am working in the Credit Department of National Bank Limited. In this assignment, I will try to make a comparative analysis between Bangladesh Bank’ suggested best practices guideline for managing credit risk and National Bank Limited existing credit policy. Chapter – 01

Risk Management of National Bank Limited
1.1 Definitions of risk:
Risk is a concept that denotes a potential negative impact to some characteristic of value that may arise from a future event, or we can say that “Risks are events or conditions that may occur, and whose occurrence, if it does take place, has a harmful or negative effect”. Risk is a commercial strategic board game, produced by Parker Brothers (now a division of Hasbro). It was invented by French movie director Albert Lamorisse, and originally released in 1957, as La Conquête du Monde (The Conquest of the World), in France. Risk is an album by thrash metal band Megadeth released in 1999. Risk is also notable as the last original Megadeth release to feature long time Megadeth guitarist Marty Friedman. This album is the first Megadeth recording with drummer Jimmy DeGrasso. The probability of harmful consequences, or expected losses (deaths, injuries, property, livelihoods, economic activity disrupted or environment damaged) resulting from interactions between natural or human-induced hazards and vulnerable conditions Risk is a science fiction short story by Isaac Asimov, first published in the May 1955 issue of Astounding Science Fiction, and reprinted in the collections The Rest of the Robots (1964) and The Complete Robot (1982).  

1.2 Definition of Credit risk:
 Risk is inherent in all commercial operations. For banks and financial institutions credit risk is an essential factor, which needs to be managed properly. Credit risk virtually is the possibility that a borrower will fail to repay debt in accordance with the terms of sanction. Credit risk therefore...
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